The stock of Restaurant Brands NZ (OTCPK:RTBRF, 30-year Financials) is estimated 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 $10.06 per share and the market cap of $1.3 billion, Restaurant Brands NZ stock shows every sign of being fairly valued. GF Value for Restaurant Brands NZ is shown in the chart below.
Because Restaurant Brands NZ is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 21% 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. Restaurant Brands NZ has a cash-to-debt ratio of 0.04, which which ranks in the bottom 10% of the companies in Restaurants industry. The overall financial strength of Restaurant Brands NZ is 4 out of 10, which indicates that the financial strength of Restaurant Brands NZ is poor. This is the debt and cash of Restaurant Brands NZ 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. Restaurant Brands NZ has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $608.2 million and earnings of $0.17 a share. Its operating margin of 3.03% better than 69% of the companies in Restaurants industry. Overall, GuruFocus ranks Restaurant Brands NZ’s profitability as fair. This is the revenue and net income of Restaurant Brands NZ 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 Restaurant Brands NZ is 21%, which ranks better than 95% of the companies in Restaurants industry. The 3-year average EBITDA growth rate is 8.7%, which ranks in the middle range of the companies in Restaurants industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Restaurant Brands NZ’s return on invested capital is 1.84, and its cost of capital is 8.05. The historical ROIC vs WACC comparison of Restaurant Brands NZ is shown below:
In conclusion, Restaurant Brands NZ (OTCPK:RTBRF, 30-year Financials) stock gives every indication of being fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the middle range of the companies in Restaurants industry. To learn more about Restaurant Brands NZ stock, you can check out its 30-year Financials here.
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