Anhui Conch Cement Co Stock Is Estimated To Be Fairly Valued

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Mar 29, 2021
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The stock of Anhui Conch Cement Co (OTCPK:AHCHY, 30-year Financials) is believed to be fairly valued, 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 $32.9106 per share and the market cap of $34.9 billion, Anhui Conch Cement Co stock is believed to be fairly valued. GF Value for Anhui Conch Cement Co is shown in the chart below.

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Because Anhui Conch Cement Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 32.8% over the past three years and is estimated to grow 5.65% annually over the next three to five years.

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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Anhui Conch Cement Co has a cash-to-debt ratio of 8.50, which which ranks better than 85% of the companies in Building Materials industry. The overall financial strength of Anhui Conch Cement Co is 8 out of 10, which indicates that the financial strength of Anhui Conch Cement Co is strong. This is the debt and cash of Anhui Conch Cement Co over the past years:

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It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Anhui Conch Cement Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $25.8 billion and earnings of $4.848 a share. Its operating margin is 23.95%, which ranks better than 86% of the companies in Building Materials industry. Overall, the profitability of Anhui Conch Cement Co is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Anhui Conch Cement Co over the past years:

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Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Anhui Conch Cement Co's 3-year average revenue growth rate is better than 95% of the companies in Building Materials industry. Anhui Conch Cement Co's 3-year average EBITDA growth rate is 25.6%, which ranks better than 82% of the companies in Building Materials industry.

Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted 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 ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Anhui Conch Cement Co's ROIC was 34.87, while its WACC came in at 7.08. The historical ROIC vs WACC comparison of Anhui Conch Cement Co is shown below:

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In summary, The stock of Anhui Conch Cement Co (OTCPK:AHCHY, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 82% of the companies in Building Materials industry. To learn more about Anhui Conch Cement Co stock, you can check out its 30-year Financials here.

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