The stock of Ballard Power Systems (NAS:BLDP, 30-year Financials) is believed 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 $22.13 per share and the market cap of $6.6 billion, Ballard Power Systems stock is estimated to be significantly overvalued. GF Value for Ballard Power Systems is shown in the chart below.
Because Ballard Power Systems is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which is estimated to grow 18.99% annually over the next three to five years.
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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. Ballard Power Systems has a cash-to-debt ratio of 42.83, which is better than 85% of the companies in Industrial Products industry. The overall financial strength of Ballard Power Systems is 8 out of 10, which indicates that the financial strength of Ballard Power Systems is strong. This is the debt and cash of Ballard Power Systems 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. Ballard Power Systems has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $104.1 million and loss of $0.22 a share. Its operating margin is -40.47%, which ranks in the bottom 10% of the companies in Industrial Products industry. Overall, the profitability of Ballard Power Systems is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Ballard Power Systems over the past years:
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 Ballard Power Systems is -15.3%, which ranks worse than 89% of the companies in Industrial Products industry. The 3-year average EBITDA growth is -247.1%, which ranks in the bottom 10% of the companies in Industrial Products 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, Ballard Power Systems's ROIC is -24.68 while its WACC came in at 10.15. The historical ROIC vs WACC comparison of Ballard Power Systems is shown below:
In short, Ballard Power Systems (NAS:BLDP, 30-year Financials) stock is believed to be significantly overvalued. The company's financial condition is strong and its profitability is poor. Its growth ranks in the bottom 10% of the companies in Industrial Products industry. To learn more about Ballard Power Systems stock, you can check out its 30-year Financials here.
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