The stock of Global Cord Blood (NYSE:CO, 30-year Financials) appears to be modestly undervalued, 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 $4.62 per share and the market cap of $561.6 million, Global Cord Blood stock shows every sign of being modestly undervalued. GF Value for Global Cord Blood is shown in the chart below.
Because Global Cord Blood is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Global Cord Blood has a cash-to-debt ratio of 1772.20, which is better than 92% of the companies in the industry of Medical Diagnostics & Research. GuruFocus ranks the overall financial strength of Global Cord Blood at 6 out of 10, which indicates that the financial strength of Global Cord Blood is fair. This is the debt and cash of Global Cord Blood 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. Global Cord Blood has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $168.8 million and earnings of $0.573 a share. Its operating margin is 47.11%, which ranks better than 96% of the companies in the industry of Medical Diagnostics & Research. Overall, the profitability of Global Cord Blood is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Global Cord Blood 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 Global Cord Blood is -1.8%, which ranks worse than 68% of the companies in the industry of Medical Diagnostics & Research. The 3-year average EBITDA growth rate is 3.3%, which ranks in the middle range of the companies in the industry of Medical Diagnostics & Research.
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, Global Cord Blood's return on invested capital is 22.55, and its cost of capital is 4.01. The historical ROIC vs WACC comparison of Global Cord Blood is shown below:
To conclude, the stock of Global Cord Blood (NYSE:CO, 30-year Financials) is believed to be modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range of the companies in the industry of Medical Diagnostics & Research. To learn more about Global Cord Blood stock, you can check out its 30-year Financials here.
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