SA D'Ieteren NV Stock Is Estimated To Be Fairly Valued

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GF Value
Apr 16, 2021
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The stock of SA D'Ieteren NV (XBRU:DIE, 30-year Financials) is estimated to be fairly valued, 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 84.75 per share and the market cap of 4.5 billion, SA D'Ieteren NV stock shows every sign of being fairly valued. GF Value for SA D'Ieteren NV is shown in the chart below.

SA D'Ieteren NV GF Value Chart

Because SA D'Ieteren NV is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 6.3% over the past five years.

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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. SA D'Ieteren NV has a cash-to-debt ratio of 6.50, which ranks better than 83% of the companies in Vehicles & Parts industry. Based on this, GuruFocus ranks SA D'Ieteren NV's financial strength as 7 out of 10, suggesting fair balance sheet. This is the debt and cash of SA D'Ieteren NV over the past years:

debt and cash

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. SA D'Ieteren NV has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of 3.3 billion and loss of 0.4 a share. Its operating margin is 0.62%, which ranks worse than 68% of the companies in Vehicles & Parts industry. Overall, GuruFocus ranks the profitability of SA D'Ieteren NV at 5 out of 10, which indicates fair profitability. This is the revenue and net income of SA D'Ieteren NV over the past years:

Revnue and Net Income

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 stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of SA D'Ieteren NV is 6.3%, which ranks better than 72% of the companies in Vehicles & Parts industry. The 3-year average EBITDA growth rate is 7.6%, which ranks better than 70% of the companies in Vehicles & Parts industry.

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, SA D'Ieteren NV's return on invested capital is 13.96, and its cost of capital is 8.44. The historical ROIC vs WACC comparison of SA D'Ieteren NV is shown below:

ROIC vs WACC

To conclude, the stock of SA D'Ieteren NV (XBRU:DIE, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 70% of the companies in Vehicles & Parts industry. To learn more about SA D'Ieteren NV stock, you can check out its 30-year Financials here.

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