Today's market saw XPEL (XPEL, Financial) experience a daily loss of 7.84%, though it has managed to secure a 3-month gain of 7.6%. With an Earnings Per Share (EPS) (EPS) of 1.76, the question arises: Is this stock modestly undervalued? In this article, we aim to answer this question using a detailed valuation analysis. We invite you to read on and delve into the intrinsic value of XPEL (XPEL).
Company Overview
XPEL Inc (XPEL, Financial) is a leading provider of protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/residential window films, and ceramic coatings. With a trained network of installers, proprietary DAP software, and a commitment to quality products and customer service, XPEL has carved a niche for itself in the industry. Currently, the company's market cap stands at $2.10 billion with sales amounting to $356.30 million.
The company's stock is trading at $76.55, while its fair value, also known as the GF Value, stands at $88.32. This discrepancy suggests that the stock might be modestly undervalued. The following analysis delves deeper into the company's value, blending financial assessment with key company details.
Understanding the GF Value
The GF Value is a unique measure that represents the current intrinsic value of a stock. It is calculated based on three key factors: historical multiples, an internal adjustment based on the company's past returns and growth, and future business performance estimates.
If the stock price is significantly above the GF Value Line, it is considered overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, the stock may be undervalued and have higher future returns. Based on this analysis, XPEL (XPEL, Financial) appears to be modestly undervalued at its current price of $76.55 per share.
As XPEL is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it is crucial to research and review a company's financial strength before purchasing shares. XPEL's cash-to-debt ratio of 0.49 ranks worse than 53.47% of 1210 companies in the Vehicles & Parts industry. However, the overall financial strength of XPEL is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. XPEL has been profitable for 10 years over the past 10 years, with revenues of $356.30 million and an Earnings Per Share (EPS) of $1.76 in the past 12 months. Its operating margin of 17.76% is better than 95.11% of 1227 companies in the Vehicles & Parts industry. Overall, GuruFocus ranks XPEL's profitability as strong.
Growth is a crucial factor in a company's valuation. XPEL's 3-year average annual revenue growth is 35.6%, which ranks better than 93.64% of 1180 companies in the Vehicles & Parts industry. The 3-year average EBITDA growth rate is 48.3%, ranking better than 90.33% of 1055 companies in the industry.
ROIC vs WACC
A company's profitability can also be evaluated by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). XPEL's ROIC of 30.63% is significantly higher than its WACC of 14.57%, suggesting the company is creating value for its shareholders.
Conclusion
In conclusion, XPEL (XPEL, Financial) appears to be modestly undervalued. The company boasts strong financial health and profitability, with growth rates that rank better than 90.33% of companies in the Vehicles & Parts industry. For more insights into XPEL's stock, check out its 30-Year Financials here.
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