The stock of Peninsula Energy (OTCPK:PENMF, 30-year Financials) gives every indication of being 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 $0.123 per share and the market cap of $113.1 million, Peninsula Energy stock is estimated to be significantly overvalued. GF Value for Peninsula Energy is shown in the chart below.
Because Peninsula Energy is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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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. Peninsula Energy has a cash-to-debt ratio of 95.77, which is better than 76% of the companies in the industry of Other Energy Sources. The overall financial strength of Peninsula Energy is 7 out of 10, which indicates that the financial strength of Peninsula Energy is fair. This is the debt and cash of Peninsula Energy over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Peninsula Energy has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $6.6 million and loss of $0.197 a share. Its operating margin is -125.54%, which ranks in the bottom 10% of the companies in the industry of Other Energy Sources. Overall, the profitability of Peninsula Energy is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Peninsula Energy over the past years:
Growth is probably one of the most important factors 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. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Peninsula Energy's 3-year average revenue growth rate is worse than 89% of the companies in the industry of Other Energy Sources. Peninsula Energy's 3-year average EBITDA growth rate is 70.4%, which ranks better than 98% of the companies in the industry of Other Energy Sources.
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, Peninsula Energy's ROIC was -431.10, while its WACC came in at 12.49. The historical ROIC vs WACC comparison of Peninsula Energy is shown below:
To conclude, Peninsula Energy (OTCPK:PENMF, 30-year Financials) stock gives every indication of being significantly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks better than 98% of the companies in the industry of Other Energy Sources. To learn more about Peninsula Energy stock, you can check out its 30-year Financials here.
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