The stock of Dickson Concepts (International) (OTCPK:DCOHF, 30-year Financials) appears to be significantly overvalued, 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 $0.535 per share and the market cap of $217.1 million, Dickson Concepts (International) stock is estimated to be significantly overvalued. GF Value for Dickson Concepts (International) is shown in the chart below.
Because Dickson Concepts (International) is significantly overvalued, the long-term return of its stock is likely to be much lower than its future 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. Dickson Concepts (International) has a cash-to-debt ratio of 1.95, which is better than 73% of the companies in the industry of Retail - Cyclical. GuruFocus ranks the overall financial strength of Dickson Concepts (International) at 6 out of 10, which indicates that the financial strength of Dickson Concepts (International) is fair. This is the debt and cash of Dickson Concepts (International) over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Dickson Concepts (International) has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $284.3 million and earnings of $0.215 a share. Its operating margin is 9.73%, which ranks better than 82% of the companies in the industry of Retail - Cyclical. Overall, the profitability of Dickson Concepts (International) is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Dickson Concepts (International) 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 Dickson Concepts (International) is -3.6%, which ranks in the middle range of the companies in the industry of Retail - Cyclical. The 3-year average EBITDA growth rate is 85%, which ranks better than 96% of the companies in the industry of Retail - Cyclical.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Dickson Concepts (International)'s return on invested capital is 8.32, and its cost of capital is 3.62. The historical ROIC vs WACC comparison of Dickson Concepts (International) is shown below:
Overall, the stock of Dickson Concepts (International) (OTCPK:DCOHF, 30-year Financials) gives every indication of being significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 96% of the companies in the industry of Retail - Cyclical. To learn more about Dickson Concepts (International) stock, you can check out its 30-year Financials here.
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