The stock of Global Cord Blood (NYSE:CO, 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 $5.015 per share and the market cap of $609.6 million, Global Cord Blood stock is believed to be modestly undervalued. GF Value for Global Cord Blood is shown in the chart below.
Because Global Cord Blood is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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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. Global Cord Blood has a cash-to-debt ratio of 1772.20, which ranks better than 92% of the companies in the industry of Medical Diagnostics & Research. Based on this, GuruFocus ranks Global Cord Blood's financial strength as 7 out of 10, suggesting fair balance sheet. This is the debt and cash of Global Cord Blood 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. Global Cord Blood has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $168.8 million and earnings of $0.573 a share. Its operating margin is 47.11%, which ranks better than 96% of the companies in the industry of Medical Diagnostics & Research. Overall, GuruFocus ranks the profitability of Global Cord Blood at 7 out of 10, which indicates fair profitability. This is the revenue and net income of Global Cord Blood 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 Global Cord Blood is -1.8%, which ranks worse than 67% of the companies in the industry of Medical Diagnostics & Research. The 3-year average EBITDA growth is 3.3%, which ranks worse than 66% of the companies in the industry of Medical Diagnostics & Research.
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, Global Cord Blood's return on invested capital is 22.55, and its cost of capital is 4.09. The historical ROIC vs WACC comparison of Global Cord Blood is shown below:
In conclusion, Global Cord Blood (NYSE:CO, 30-year Financials) stock gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 66% of the companies in the industry of Medical Diagnostics & Research. To learn more about Global Cord Blood stock, you can check out its 30-year Financials here.
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