The stock of CK Infrastructure Holdings (HKSE:01038, 30-year Financials) is estimated to be 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 HK$49.7 per share and the market cap of HK$129.8 billion, CK Infrastructure Holdings stock gives every indication 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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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. CK Infrastructure Holdings has a cash-to-debt ratio of 0.41, which which ranks in the middle range of the companies in the industry of Utilities - Regulated. The overall financial strength of CK Infrastructure Holdings is 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:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. CK Infrastructure Holdings has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of HK$7.2 billion and earnings of HK$2.823 a share. Its operating margin of 44.18% better than 95% of the companies in the industry of Utilities - Regulated. Overall, GuruFocus ranks CK Infrastructure Holdings's profitability as fair. This is the revenue and net income of CK Infrastructure Holdings 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 performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate 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 rate is -7.9%, which ranks worse than 84% of the companies in the industry of Utilities - Regulated.
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, CK Infrastructure Holdings's return on invested capital is 2.00, and its cost of capital is 6.52. The historical ROIC vs WACC comparison of CK Infrastructure Holdings is shown below:
Overall, The stock of CK Infrastructure Holdings (HKSE:01038, 30-year Financials) gives every indication of being significantly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 84% 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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