The stock of Kuehne + Nagel International AG (OTCPK:KHNGY, 30-year Financials) appears 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 $61.37 per share and the market cap of $36.7 billion, Kuehne + Nagel International AG stock shows every sign of being significantly overvalued. GF Value for Kuehne + Nagel International AG is shown in the chart below.
Because Kuehne + Nagel International AG is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 3.1% over the past three years and is estimated to grow 3.51% 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. Kuehne + Nagel International AG has a cash-to-debt ratio of 0.89, which is better than 74% of the companies in Transportation industry. The overall financial strength of Kuehne + Nagel International AG is 6 out of 10, which indicates that the financial strength of Kuehne + Nagel International AG is fair. This is the debt and cash of Kuehne + Nagel International AG 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. Kuehne + Nagel International AG has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $23.4 billion and earnings of $1.752 a share. Its operating margin is 5.96%, which ranks in the middle range of the companies in Transportation industry. Overall, the profitability of Kuehne + Nagel International AG is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Kuehne + Nagel International AG 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 Kuehne + Nagel International AG is 3.1%, which ranks in the middle range of the companies in Transportation industry. The 3-year average EBITDA growth rate is 15.6%, which ranks better than 75% of the companies in Transportation industry.
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, Kuehne + Nagel International AG's return on invested capital is 13.27, and its cost of capital is 6.77.
Overall, Kuehne + Nagel International AG (OTCPK:KHNGY, 30-year Financials) stock appears to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 75% of the companies in Transportation industry. To learn more about Kuehne + Nagel International AG stock, you can check out its 30-year Financials here.
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