The stock of Usana Health Sciences (NYSE:USNA, 30-year Financials) appears to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $97.86 per share and the market cap of $2 billion, Usana Health Sciences stock appears to be fairly valued. GF Value for Usana Health Sciences is shown in the chart below.
Because Usana Health Sciences is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 8% over the past three years and is estimated to grow 3.23% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Usana Health Sciences has a cash-to-debt ratio of 36.20, which is better than 88% of the companies in the industry of Consumer Packaged Goods. The overall financial strength of Usana Health Sciences is 8 out of 10, which indicates that the financial strength of Usana Health Sciences is strong. This is the debt and cash of Usana Health Sciences over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Usana Health Sciences has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.1 billion and earnings of $5.86 a share. Its operating margin is 15.55%, which ranks better than 85% of the companies in the industry of Consumer Packaged Goods. Overall, the profitability of Usana Health Sciences is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Usana Health Sciences over the past years:
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 Usana Health Sciences is 8%, which ranks better than 70% of the companies in the industry of Consumer Packaged Goods. The 3-year average EBITDA growth rate is 15.7%, which ranks better than 74% of the companies in the industry of Consumer Packaged Goods.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Usana Health Sciences's return on invested capital is 38.79, and its cost of capital is 7.77. The historical ROIC vs WACC comparison of Usana Health Sciences is shown below:
To conclude, The stock of Usana Health Sciences (NYSE:USNA, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 74% of the companies in the industry of Consumer Packaged Goods. To learn more about Usana Health Sciences stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
