Grupo Simec SAB de CV (SIM, Financial) has recently experienced a notable daily loss of -9.59%, alongside a three-month decline of -12.68%. With an Earnings Per Share (EPS) of 1.21, investors are prompted to question whether the stock is modestly overvalued. This article aims to provide a detailed valuation analysis to determine the true worth of Grupo Simec SAB de CV's shares in the current financial climate.
Company Introduction
Grupo Simec SAB de CV is a key player in the steel industry, specializing in the manufacture, processing, and distribution of special bar quality (SBQ) steel and structural steel products. With its largest markets in the United States, Brazil, and Mexico, Grupo Simec SAB de CV's SBQ products are widely utilized in various engineered applications, while its structural steel products serve the non-residential construction market. The current stock price of $31 per share is juxtaposed against the GF Value of $23.83, suggesting that the stock might be trading above its intrinsic value.
Summarize GF Value
The GF Value is a unique measure that calculates the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, as well as future business performance estimates. According to the GF Value Line, Grupo Simec SAB de CV (SIM, Financial) seems to be modestly overvalued. This assessment indicates that the stock's long-term return may not align with the company's business growth, given its current market price.
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Financial Strength
When considering an investment, the financial strength of a company is crucial to avoid potential capital loss. Grupo Simec SAB de CV boasts a robust cash-to-debt ratio of 4418.24, ranking higher than 91.95% of peers in the Steel industry. This impressive ratio has earned the company a GuruFocus financial strength rating of 10 out of 10, highlighting a strong balance sheet.
Profitability and Growth
Grupo Simec SAB de CV has consistently demonstrated profitability, with an impressive track record over the past decade. The company's revenue of $2.30 billion and an Earnings Per Share (EPS) of $1.21 over the past twelve months are complemented by an operating margin of 20.48%, which ranks better than 92.9% of its industry counterparts. With a profitability rank of 8 out of 10, Grupo Simec SAB de CV stands out for its robust profitability.
Furthermore, the company's growth is a significant factor in its valuation. Grupo Simec SAB de CV's average annual revenue growth rate of 16.8% surpasses 70.05% of the Steel industry, indicating a strong capacity for creating shareholder value.
ROIC vs. WACC
An insightful way to gauge a company's profitability is by comparing its Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC). Grupo Simec SAB de CV's ROIC of 14.2% over the past year exceeds its WACC of 11.54%, suggesting the company is effectively creating value for its shareholders.
Conclusion
In conclusion, while the stock of Grupo Simec SAB de CV (SIM, Financial) may appear modestly overvalued, the company's financial health and profitability are strong. Its growth also ranks favorably within the Steel industry. For a comprehensive understanding of Grupo Simec SAB de CV's financials, interested parties can explore 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.
