The stock of Atlas Air Worldwide Holdings (NAS:AAWW, 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 $68.51 per share and the market cap of $2 billion, Atlas Air Worldwide Holdings stock gives every indication of being modestly overvalued. GF Value for Atlas Air Worldwide Holdings is shown in the chart below.
Because Atlas Air Worldwide Holdings is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 13% 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. Atlas Air Worldwide Holdings has a cash-to-debt ratio of 0.26, which which ranks in the middle range of the companies in Transportation industry. The overall financial strength of Atlas Air Worldwide Holdings is 5 out of 10, which indicates that the financial strength of Atlas Air Worldwide Holdings is fair. This is the debt and cash of Atlas Air Worldwide Holdings 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. Atlas Air Worldwide Holdings has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $3.4 billion and earnings of $14.99 a share. Its operating margin is 16.22%, which ranks better than 81% of the companies in Transportation industry. Overall, the profitability of Atlas Air Worldwide Holdings is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Atlas Air Worldwide 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 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 Atlas Air Worldwide Holdings is 13%, which ranks better than 87% of the companies in Transportation industry. The 3-year average EBITDA growth rate is 28%, which ranks better than 84% of the companies in Transportation industry.
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, Atlas Air Worldwide Holdings’s ROIC was 7.58, while its WACC came in at 5.70. The historical ROIC vs WACC comparison of Atlas Air Worldwide Holdings is shown below:
In closing, Atlas Air Worldwide Holdings (NAS:AAWW, 30-year Financials) stock shows every sign of being modestly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 84% of the companies in Transportation industry. To learn more about Atlas Air Worldwide Holdings stock, you can check out its 30-year Financials here.
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