The stock of Security National Financial (NAS:SNFCA, 30-year Financials) gives every indication 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 $8.84 per share and the market cap of $170.9 million, Security National Financial stock shows every sign of being fairly valued. GF Value for Security National Financial is shown in the chart below.
Because Security National Financial is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 20.4% over the past five years.
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. Security National Financial has a cash-to-debt ratio of 0.59, which which ranks in the middle range of the companies in Credit Services industry. The overall financial strength of Security National Financial is 4 out of 10, which indicates that the financial strength of Security National Financial is poor. This is the debt and cash of Security National Financial over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Security National Financial has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $524.5 million and earnings of $3.364 a share. Its operating margin is 0.00%, which ranks in the bottom 10% of the companies in Credit Services industry. Overall, GuruFocus ranks the profitability of Security National Financial at 6 out of 10, which indicates fair profitability. This is the revenue and net income of Security National Financial 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. Security National Financial’s 3-year average revenue growth rate is better than 80% of the companies in Credit Services industry. Security National Financial’s 3-year average EBITDA growth rate is 60.9%, which ranks better than 87% of the companies in Credit Services 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, Security National Financial’s ROIC was 5.34, while its WACC came in at 4.60. The historical ROIC vs WACC comparison of Security National Financial is shown below:
To conclude, The stock of Security National Financial (NAS:SNFCA, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks better than 87% of the companies in Credit Services industry. To learn more about Security National Financial stock, you can check out its 30-year Financials here.
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