The stock of Amcon Distributing Co (AMEX:DIT, 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 $116.45 per share and the market cap of $64.2 million, Amcon Distributing Co stock is believed to be fairly valued. GF Value for Amcon Distributing Co is shown in the chart below.
Because Amcon Distributing 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 13.3% over the past 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. Amcon Distributing Co has a cash-to-debt ratio of 0.01, which which ranks in the bottom 10% of the companies in the industry of Retail - Defensive. The overall financial strength of Amcon Distributing Co is 6 out of 10, which indicates that the financial strength of Amcon Distributing Co is fair. This is the debt and cash of Amcon Distributing Co over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Amcon Distributing Co has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $1.6 billion and earnings of $14.53 a share. Its operating margin of 0.80% worse than 70% of the companies in the industry of Retail - Defensive. Overall, GuruFocus ranks Amcon Distributing Co's profitability as fair. This is the revenue and net income of Amcon Distributing 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 performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Amcon Distributing Co is 13.3%, which ranks better than 84% of the companies in the industry of Retail - Defensive. The 3-year average EBITDA growth rate is 21.7%, which ranks better than 72% of the companies in the industry of Retail - Defensive.
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, Amcon Distributing Co's ROIC was 6.71, while its WACC came in at 3.84. The historical ROIC vs WACC comparison of Amcon Distributing Co is shown below:
In closing, The stock of Amcon Distributing Co (AMEX:DIT, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 72% of the companies in the industry of Retail - Defensive. To learn more about Amcon Distributing Co stock, you can check out its 30-year Financials here.
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