The daily stock fluctuations and long-term performance of a company can be quite telling of its overall market position. For Grupo Simec SAB de CV (SIM, Financial), a recent downturn of -5.84% in a single day and a three-month loss of -13.72% raises questions about its valuation. With an Earnings Per Share (EPS) of 1.21, investors are pondering whether the stock is modestly overvalued. This article delves into the valuation analysis of Grupo Simec SAB de CV (SIM) to provide readers with a comprehensive understanding of its current market standing.
Company Introduction
Grupo Simec SAB de CV operates as a diversified manufacturer, processor, and distributor of special bar quality (SBQ) steel and structural steel products, with a significant presence in the United States, Brazil, and Mexico. The company's SBQ products serve a wide array of engineered applications, while its structural steel products are predominantly used in non-residential construction. With a market cap of $4.70 billion and sales of $2.30 billion, the company exhibits a robust operating margin of 20.48%. The question at hand is whether the current stock price of $30.76 accurately reflects the company's fair value, estimated at $23.9 by GuruFocus' proprietary GF Value assessment.
Summarize GF Value
The GF Value is a unique measure that determines the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and estimates of future business performance. When a stock's price significantly deviates from the GF Value Line, it suggests a misalignment with its fair value. For Grupo Simec SAB de CV (SIM, Financial), the stock appears modestly overvalued, which may indicate a lower long-term return compared to the company's business growth.
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Financial Strength
Investors must scrutinize a company's financial strength to avoid the high risk of permanent capital loss. Grupo Simec SAB de CV's impressive cash-to-debt ratio of 4418.24 places it ahead of 92.52% of its peers in the steel industry, reflecting strong financial stability. The company's overall financial strength is rated a perfect 10 out of 10, underscoring its robust financial health.
Profitability and Growth
Consistently profitable companies pose less risk for investors. Grupo Simec SAB de CV has maintained profitability over the past decade, with a remarkable operating margin of 20.48%, outperforming 93.09% of its industry counterparts. The company's profitability is ranked 8 out of 10, signifying strong profitability. Additionally, Grupo Simec SAB de CV's growth is noteworthy, with a 3-year average revenue growth rate surpassing 70.1% of the industry and a 3-year average EBITDA growth rate ranking better than 86.87% of its peers.
Return on Invested Capital vs. Weighted Average Cost of Capital
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) offers insights into its profitability. Grupo Simec SAB de CV's ROIC of 14.2 over the past 12 months suggests that it is effectively creating value for shareholders, as it exceeds the WACC of 11.54.
Conclusion
In conclusion, Grupo Simec SAB de CV (SIM, Financial) is estimated to be modestly overvalued. The company boasts a strong financial condition and robust profitability, with growth rankings that outshine a significant portion of the steel industry. For a detailed analysis of Grupo Simec SAB de CV's stock and 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.
