The stock of Global Cord Blood (NYSE:CO, 30-year Financials) shows every sign of being fairly valued, 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 $5.64 per share and the market cap of $685.5 million, Global Cord Blood stock is estimated to be fairly valued. GF Value for Global Cord Blood is shown in the chart below.
Because Global Cord Blood is fairly valued, the long-term return of its stock is likely to be close to the rate of its 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. Global Cord Blood has a cash-to-debt ratio of 1772.20, which is better than 91% of the companies in the industry of Medical Diagnostics & Research. The overall financial strength of Global Cord Blood is 7 out of 10, which indicates that the financial strength of Global Cord Blood is fair. This is the debt and cash of Global Cord Blood 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. Global Cord Blood has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $168.8 million and earnings of $0.573 a share. Its operating margin of 47.11% better than 96% of the companies in the industry of Medical Diagnostics & Research. Overall, GuruFocus ranks Global Cord Blood’s profitability as fair. This is the revenue and net income of Global Cord Blood 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 Global Cord Blood is -1.8%, which ranks worse than 68% of the companies in the industry of Medical Diagnostics & Research. The 3-year average EBITDA growth rate is 3.3%, which ranks in the middle range of the companies in the industry of Medical Diagnostics & Research.
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, Global Cord Blood’s ROIC was 22.55, while its WACC came in at 3.99. The historical ROIC vs WACC comparison of Global Cord Blood is shown below:
In short, the stock of Global Cord Blood (NYSE:CO, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range 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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