The stock of Mapfre SA (OTCPK:MPFRY, 30-year Financials) shows every sign of being modestly undervalued, 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 $4.15 per share and the market cap of $6.3 billion, Mapfre SA stock shows every sign of being modestly undervalued. GF Value for Mapfre SA is shown in the chart below.
Because Mapfre SA is relatively undervalued, the long-term return of its stock is likely to be higher 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. Mapfre SA has a cash-to-debt ratio of 0.74, which is worse than 71% of the companies in Insurance industry. The overall financial strength of Mapfre SA is 5 out of 10, which indicates that the financial strength of Mapfre SA is fair. This is the debt and cash of Mapfre SA 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. Mapfre SA has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $21.9 billion and earnings of $0.382 a share. Its operating margin of 0.00% in the bottom 10% of the companies in Insurance industry. Overall, GuruFocus ranks Mapfre SA's profitability as poor. This is the revenue and net income of Mapfre SA over the past years:
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. Mapfre SA's 3-year average revenue growth rate is worse than 83% of the companies in Insurance industry. Mapfre SA's 3-year average EBITDA growth rate is -9.2%, which ranks worse than 71% of the companies in Insurance 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, Mapfre SA's ROIC is 1.27 while its WACC came in at 3.99. The historical ROIC vs WACC comparison of Mapfre SA is shown below:
To conclude, the stock of Mapfre SA (OTCPK:MPFRY, 30-year Financials) appears to be modestly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks worse than 71% of the companies in Insurance industry. To learn more about Mapfre SA stock, you can check out its 30-year Financials here.
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