The stock of National Research (NAS:NRC, 30-year Financials) gives every indication of being 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 $46.975 per share and the market cap of $1.2 billion, National Research stock is believed to be fairly valued. GF Value for National Research is shown in the chart below.
Because National Research is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 3.6% over the past five years.
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. National Research has a cash-to-debt ratio of 1.13, which is in the middle range of the companies in the industry of Medical Diagnostics & Research. GuruFocus ranks the overall financial strength of National Research at 7 out of 10, which indicates that the financial strength of National Research is fair. This is the debt and cash of National Research 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. National Research has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $133.3 million and earnings of $1.45 a share. Its operating margin is 31.62%, which ranks better than 92% of the companies in the industry of Medical Diagnostics & Research. Overall, GuruFocus ranks the profitability of National Research at 8 out of 10, which indicates strong profitability. This is the revenue and net income of National Research 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 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 National Research is 3.6%, which ranks in the middle range of the companies in the industry of Medical Diagnostics & Research. The 3-year average EBITDA growth rate is 8.6%, which ranks in the middle range of the companies in the industry of Medical Diagnostics & Research.
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, National Research's ROIC is 36.91 while its WACC came in at 4.68. The historical ROIC vs WACC comparison of National Research is shown below:
In closing, the stock of National Research (NAS:NRC, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks in the middle range of the companies in the industry of Medical Diagnostics & Research. To learn more about National Research stock, you can check out its 30-year Financials here.
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