The stock of CK Infrastructure Holdings (OTCPK:CKISY, 30-year Financials) shows every sign of being significantly 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 $29.59 per share and the market cap of $15.7 billion, CK Infrastructure Holdings stock shows every sign of being significantly undervalued. GF Value for CK Infrastructure Holdings is shown in the chart below.
Because CK Infrastructure Holdings is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth, which averaged 6.1% over the past five years.
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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. CK Infrastructure Holdings has a cash-to-debt ratio of 0.41, which is in the middle range of the companies in the industry of Utilities - Regulated. GuruFocus ranks the overall financial strength of CK Infrastructure Holdings at 5 out of 10, which indicates that the financial strength of CK Infrastructure Holdings is fair. This is the debt and cash of CK Infrastructure Holdings over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. CK Infrastructure Holdings has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $926.6 million and earnings of $1.821 a share. Its operating margin is 44.18%, which ranks better than 95% of the companies in the industry of Utilities - Regulated. Overall, the profitability of CK Infrastructure Holdings is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of CK Infrastructure Holdings 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 CK Infrastructure Holdings is 6.1%, which ranks in the middle range of the companies in the industry of Utilities - Regulated. The 3-year average EBITDA growth is -7.9%, which ranks worse than 83% of the companies in the industry of Utilities - Regulated.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted 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 ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, CK Infrastructure Holdings's ROIC was 2.00, while its WACC came in at 6.42. The historical ROIC vs WACC comparison of CK Infrastructure Holdings is shown below:
To conclude, the stock of CK Infrastructure Holdings (OTCPK:CKISY, 30-year Financials) is believed to be significantly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 83% of the companies in the industry of Utilities - Regulated. To learn more about CK Infrastructure Holdings stock, you can check out its 30-year Financials here.
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