The stock of Nippon Sheet Glass Co (OTCPK:NPSGY, 30-year Financials) is believed 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 $4.82 per share and the market cap of $437.6 million, Nippon Sheet Glass Co stock gives every indication of being modestly undervalued. GF Value for Nippon Sheet Glass Co is shown in the chart below.
Because Nippon Sheet Glass Co is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Nippon Sheet Glass Co has a cash-to-debt ratio of 0.10, which which ranks worse than 87% of the companies in Vehicles & Parts industry. The overall financial strength of Nippon Sheet Glass Co is 3 out of 10, which indicates that the financial strength of Nippon Sheet Glass Co is poor. This is the debt and cash of Nippon Sheet Glass Co over the past years:
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. Nippon Sheet Glass Co has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $4.6 billion and loss of $3.76 a share. Its operating margin is 2.29%, which ranks in the middle range of the companies in Vehicles & Parts industry. Overall, GuruFocus ranks the profitability of Nippon Sheet Glass Co at 4 out of 10, which indicates poor profitability. This is the revenue and net income of Nippon Sheet Glass Co over the past years:
Growth is probably one of the most important factors 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. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Nippon Sheet Glass Co's 3-year average revenue growth rate is in the middle range of the companies in Vehicles & Parts industry. Nippon Sheet Glass Co's 3-year average EBITDA growth rate is -77.1%, which ranks in the bottom 10% of the companies in Vehicles & Parts industry.
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, Nippon Sheet Glass Co's return on invested capital is 1.81, and its cost of capital is 4.22. The historical ROIC vs WACC comparison of Nippon Sheet Glass Co is shown below:
In closing, the stock of Nippon Sheet Glass Co (OTCPK:NPSGY, 30-year Financials) appears to be modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks in the bottom 10% of the companies in Vehicles & Parts industry. To learn more about Nippon Sheet Glass Co stock, you can check out its 30-year Financials here.
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