The stock of Nissan Motor Co (OTCPK:NSANY, 30-year Financials) shows every sign of being modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $11.3 per share and the market cap of $22.1 billion, Nissan Motor Co stock shows every sign of being modestly overvalued. GF Value for Nissan Motor Co is shown in the chart below.
Because Nissan Motor Co is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Nissan Motor Co has a cash-to-debt ratio of 0.28, which is worse than 69% of the companies in Vehicles & Parts industry. The overall financial strength of Nissan Motor Co is 3 out of 10, which indicates that the financial strength of Nissan Motor Co is poor. This is the debt and cash of Nissan Motor Co over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Nissan Motor Co has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $72.5 billion and loss of $5.132 a share. Its operating margin is -2.95%, which ranks worse than 82% of the companies in Vehicles & Parts industry. Overall, the profitability of Nissan Motor Co is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of Nissan Motor Co over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Nissan Motor Co is -4.9%, which ranks worse than 75% of the companies in Vehicles & Parts industry. The 3-year average EBITDA growth rate is -47.1%, which ranks in the bottom 10% of the companies in Vehicles & Parts industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Nissan Motor Co's ROIC is -1.76 while its WACC came in at 2.37. The historical ROIC vs WACC comparison of Nissan Motor Co is shown below:
In summary, Nissan Motor Co (OTCPK:NSANY, 30-year Financials) stock gives every indication of being modestly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the bottom 10% of the companies in Vehicles & Parts industry. To learn more about Nissan Motor Co stock, you can check out its 30-year Financials here.
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