With a daily loss of -39.27% and a 3-month loss of -51.66%, Fox Factory Holding Corp (FOXF, Financial) is currently trading at $50.49 per share. The company's Earnings Per Share (EPS) stands at 4.37. But is the stock really undervalued? This article provides an in-depth analysis of Fox Factory Holding Corp's valuation, encouraging readers to delve deeper into the company's financial health and prospects.
Company Overview
Fox Factory Holding Corp is a leading designer, manufacturer, and marketer of performance-defining products and systems. The company primarily focuses on bikes, on-road vehicles with and without off-road capabilities, off-road vehicles and trucks, ATVs, snowmobiles, specialty vehicles and applications, motorcycles, and commercial trucks. It operates under the FOX, FOX RACING SHOX, and RACE FACE brands, with a significant presence in North America, Asia, Europe, and the rest of the world.
With a market cap of $2.10 billion, Fox Factory Holding Corp's stock price is compared to its GF Value, a proprietary estimation of fair value. This comparison provides a deeper understanding of the company's intrinsic value.
Understanding the GF Value
The GF Value is an exclusive measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
The stock of Fox Factory Holding Corp (FOXF, Financial) appears to be significantly undervalued, according to GuruFocus' valuation method. The GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns.
Given that Fox Factory Holding Corp (FOXF, Financial) is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Evaluating Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, it is crucial to carefully review a company's financial strength before deciding to buy its stock. A good starting point for understanding a company's financial strength is looking at its cash-to-debt ratio and interest coverage. Fox Factory Holding Corp has a cash-to-debt ratio of 0.31, which is worse than 66.29% of 1234 companies in the Vehicles & Parts industry. However, GuruFocus ranks the overall financial strength of Fox Factory Holding Corp at 8 out of 10, indicating strong financial health.
Profitability and Growth
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. Fox Factory Holding Corp has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $1.60 billion and Earnings Per Share (EPS) of $4.37. Its operating margin of 14.18% is better than 89.04% of 1268 companies in the Vehicles & Parts industry. Overall, GuruFocus ranks Fox Factory Holding Corp's profitability as strong.
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 Fox Factory Holding Corp is 25.4%, which ranks better than 89.15% of 1207 companies in the Vehicles & Parts industry. The 3-year average EBITDA growth rate is 27.8%, which ranks better than 79.85% of 1082 companies in the Vehicles & Parts industry.
ROIC vs WACC
Another way to assess 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, Fox Factory Holding Corp's return on invested capital is 14.22, and its cost of capital is 13.6.
Conclusion
In summary, the stock of Fox Factory Holding Corp (FOXF, Financial) shows every sign of being significantly undervalued. The company's financial condition is strong, and its profitability is strong. Its growth ranks better than 79.85% of 1082 companies in the Vehicles & Parts industry. To learn more about Fox Factory Holding Corp stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
