Brady Corp (BRC, Financial) has recently experienced a daily gain of 11.42%, with a 3-month gain of 17.12%. The company's Earnings Per Share (EPS) stands at 3.32. But is the stock fairly valued? This article will provide an in-depth analysis of Brady's valuation, financial strength, profitability, and growth to answer this question. Read on to understand why this information is critical for making informed investment decisions.
About Brady Corp
Brady Corp provides identification solutions and workplace safety products. The company's products, sold under the Brady brand, include safety signs, labelling systems, material identification systems, wire identification, patient identification, and people identification. Brady also offers workplace safety and compliance products like safety and compliance signs, asset tracking labels, and first-aid products. The United States is its largest market.
Brady's stock price is currently $56.6, and the company's market cap is $2.80 billion. Comparatively, the GF Value, an estimation of fair value, is $57.21. This suggests that Brady's stock is fairly valued. Here's a look at Brady's income breakdown:
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock, derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value at which the stock should be traded. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
The GF Value Line is the fair value at which the stock should be traded. If the stock price 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.
Given its current price of $56.6 per share and the market cap of $2.80 billion, Brady's stock is believed to be fairly valued. As Brady is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Brady's Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Brady has a cash-to-debt ratio of 1.7, which is better than 57.1% of 1042 companies in the Business Services industry. GuruFocus ranks the overall financial strength of Brady at 9 out of 10, which indicates that the financial strength of Brady is strong.
This is the debt and cash of Brady over the past years: 
Profitability and Growth
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. Brady has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $1.30 billion and Earnings Per Share (EPS) of $3.32. Its operating margin is 16.5%, which ranks better than 81.06% of 1040 companies in the Business Services industry. Overall, the profitability of Brady is ranked 7 out of 10, which indicates fair profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Brady is 5%, which ranks better than 52.71% of 979 companies in the Business Services industry. The 3-year average EBITDA growth is 7.1%, which ranks worse than 56.26% of 846 companies in the Business Services industry.
Return on Invested Capital vs. Weighted Average Cost of Capital
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Brady's return on invested capital is 14.52, and its cost of capital is 9.6.
The historical ROIC vs WACC comparison of Brady is shown below: 
Conclusion
In conclusion, Brady (BRC, Financial) is believed to be fairly valued. The company's financial condition is strong, and its profitability is fair. Its growth ranks worse than 56.26% of 846 companies in the Business Services industry. To learn more about Brady stock, you can check out its 30-Year Financials here.
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