The stock of Patriot Transportation Holding (NAS:PATI, 30-year Financials) shows every sign of being 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 $11.28 per share and the market cap of $38.1 million, Patriot Transportation Holding stock is estimated to be modestly undervalued. GF Value for Patriot Transportation Holding is shown in the chart below.
Because Patriot Transportation Holding 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. Patriot Transportation Holding has a cash-to-debt ratio of 2.62, which is better than 85% of the companies in Transportation industry. GuruFocus ranks the overall financial strength of Patriot Transportation Holding at 7 out of 10, which indicates that the financial strength of Patriot Transportation Holding is fair. This is the debt and cash of Patriot Transportation Holding over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Patriot Transportation Holding has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $84.1 million and earnings of $0.14 a share. Its operating margin of 0.12% worse than 69% of the companies in Transportation industry. Overall, GuruFocus ranks Patriot Transportation Holding's profitability as fair. This is the revenue and net income of Patriot Transportation Holding 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 Patriot Transportation Holding is -8.1%, which ranks worse than 77% of the companies in Transportation industry. The 3-year average EBITDA growth rate is -9.9%, which ranks worse than 81% of the companies in Transportation industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). 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. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Patriot Transportation Holding's ROIC is 0.17 while its WACC came in at 3.45. The historical ROIC vs WACC comparison of Patriot Transportation Holding is shown below:
In short, Patriot Transportation Holding (NAS:PATI, 30-year Financials) stock is believed to be modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 81% of the companies in Transportation industry. To learn more about Patriot Transportation Holding stock, you can check out its 30-year Financials here.
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