Bayerische Motoren Werke AG Stock Appears To Be Modestly Overvalued

Author's Avatar
Apr 11, 2021
Article's Main Image

The stock of Bayerische Motoren Werke AG (OTCPK:BAMXF, 30-year Financials) is believed to be modestly 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 $104.5 per share and the market cap of $67.8 billion, Bayerische Motoren Werke AG stock appears to be modestly overvalued. GF Value for Bayerische Motoren Werke AG is shown in the chart below.

US0CNM.png?1618168350

Because Bayerische Motoren Werke AG is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 0.2% over the past three years and is estimated to grow 4.73% 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. Bayerische Motoren Werke AG has a cash-to-debt ratio of 0.21, which is worse than 75% of the companies in Vehicles & Parts industry. The overall financial strength of Bayerische Motoren Werke AG is 4 out of 10, which indicates that the financial strength of Bayerische Motoren Werke AG is poor. This is the debt and cash of Bayerische Motoren Werke AG over the past years:

1618168350923.png

It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Bayerische Motoren Werke AG has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $115 billion and earnings of $6.804 a share. Its operating margin is 4.81%, which ranks in the middle range of the companies in Vehicles & Parts industry. Overall, GuruFocus ranks the profitability of Bayerische Motoren Werke AG at 6 out of 10, which indicates fair profitability. This is the revenue and net income of Bayerische Motoren Werke AG over the past years:

1618168351259.png

One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Bayerische Motoren Werke AG is 0.2%, which ranks in the middle range of the companies in Vehicles & Parts industry. The 3-year average EBITDA growth is -9.5%, which ranks worse than 68% of the companies in Vehicles & Parts 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, Bayerische Motoren Werke AG's ROIC is 1.73 while its WACC came in at 2.54. The historical ROIC vs WACC comparison of Bayerische Motoren Werke AG is shown below:

1618168351636.png

In conclusion, The stock of Bayerische Motoren Werke AG (OTCPK:BAMXF, 30-year Financials) is believed to be modestly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 68% of the companies in Vehicles & Parts industry. To learn more about Bayerische Motoren Werke AG 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.