Steelcase Inc (SCS, Financial) has recently shown a notable daily gain of 10.94% and an impressive 3-month gain of 34.79%. With an Earnings Per Share (EPS) of $0.63, investors are keen to understand whether the stock is fairly valued. This article delves into the valuation analysis of Steelcase, offering readers an informed perspective on the stock's current market position.
Company Introduction
Steelcase Inc is a prominent furniture company with a strong presence in the United States, Europe, the Middle East, and Africa. It operates primarily through its Americas and EMEA segments, offering a range of architecture, furniture, and technology products. With a current stock price of $14.09 and a market cap of $1.60 billion, the company's valuation is a critical factor for potential investors. The GF Value, which estimates the fair value of a stock, is set at $12.87 for Steelcase, providing a baseline for comparison and further analysis.
Summarize GF Value
The GF Value is a unique intrinsic value metric developed by GuruFocus. It takes into account historical trading multiples, an adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value. Steelcase (SCS, Financial) is currently considered fairly valued according to this measure. If the stock's price is significantly above or below the GF Value Line, it can indicate that the stock is overvalued or undervalued, respectively, and may signal future return potential.
Because Steelcase 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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Financial Strength
Assessing a company's financial strength is crucial before investing. Steelcase's cash-to-debt ratio of 0.24 places it below the majority of its industry peers. With a financial strength rating of 6 out of 10, the company's financial position is considered fair. This is an important consideration for investors looking for stability and reduced risk of permanent loss.
Profitability and Growth
Profitability is a key indicator of a company's financial health and potential for long-term success. Steelcase has maintained profitability for 10 out of the past 10 years. With annual revenues of $3.20 billion and an Earnings Per Share (EPS) of $0.63, the company's operating margin lags behind many of its competitors. In terms of growth, Steelcase's 3-year average revenue growth rate is below the industry average, and its EBITDA growth rate has been negative, placing it in a less favorable position compared to industry counterparts.
ROIC vs WACC
The comparison of a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC) can shed light on its value creation. Steelcase's ROIC of 4.8 is below its WACC of 8.35, indicating that the company may not be generating sufficient returns on its investments. This is a critical aspect for investors to consider when evaluating the company's profitability and potential growth.
Conclusion
In summary, Steelcase (SCS, Financial) is currently believed to be fairly valued. The company's financial condition and profitability are fair, but its growth ranks lower than many of its peers in the Industrial Products industry. Investors interested in a deeper understanding of Steelcase's financials can explore the company's 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.
