The stock of Boise Cascade Co (NYSE:BCC, 30-year Financials) shows every sign of being modestly 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 $56.93 per share and the market cap of $2.2 billion, Boise Cascade Co stock appears to be modestly overvalued. GF Value for Boise Cascade Co is shown in the chart below.
Because Boise Cascade Co is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 7% over the past three years and is estimated to grow 7.16% 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. Boise Cascade Co has a cash-to-debt ratio of 0.87, which is better than 69% of the companies in Forest Products industry. The overall financial strength of Boise Cascade Co is 7 out of 10, which indicates that the financial strength of Boise Cascade Co is fair. This is the debt and cash of Boise Cascade Co 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. Boise Cascade Co has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $6.1 billion and earnings of $7.88 a share. Its operating margin is 8.40%, which ranks in the middle range of the companies in Forest Products industry. Overall, the profitability of Boise Cascade Co is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Boise Cascade Co 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 Boise Cascade Co is 7%, which ranks better than 81% of the companies in Forest Products industry. The 3-year average EBITDA growth is 21.7%, which ranks better than 85% of the companies in Forest Products industry.
One can also evaluate a company’s profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Boise Cascade Co’s ROIC is 30.48 while its WACC came in at 11.14. The historical ROIC vs WACC comparison of Boise Cascade Co is shown below:
Overall, the stock of Boise Cascade Co (NYSE:BCC, 30-year Financials) gives every indication of being modestly overvalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 85% of the companies in Forest Products industry. To learn more about Boise Cascade Co stock, you can check out its 30-year Financials here.
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