The stock of Bakkafrost P/F (OTCPK:BKFKF, 30-year Financials) is believed to be 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 $85.09 per share and the market cap of $5.1 billion, Bakkafrost P/F stock appears to be modestly overvalued. GF Value for Bakkafrost P/F is shown in the chart below.
Because Bakkafrost P/F is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 3% over the past three years and is estimated to grow 12.19% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
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. Bakkafrost P/F has a cash-to-debt ratio of 0.14, which is worse than 76% of the companies in the industry of Consumer Packaged Goods. The overall financial strength of Bakkafrost P/F is 6 out of 10, which indicates that the financial strength of Bakkafrost P/F is fair. This is the debt and cash of Bakkafrost P/F 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. Bakkafrost P/F has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $723.6 million and earnings of $2.677 a share. Its operating margin is 29.52%, which ranks better than 97% of the companies in the industry of Consumer Packaged Goods. Overall, the profitability of Bakkafrost P/F is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Bakkafrost P/F 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 Bakkafrost P/F is 3%, which ranks in the middle range of the companies in the industry of Consumer Packaged Goods. The 3-year average EBITDA growth rate is 5.7%, which ranks in the middle range of the companies in the industry of Consumer Packaged Goods.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Bakkafrost P/F’s return on invested capital is 8.91, and its cost of capital is 5.29. The historical ROIC vs WACC comparison of Bakkafrost P/F is shown below:
Overall, The stock of Bakkafrost P/F (OTCPK:BKFKF, 30-year Financials) shows every sign of being modestly overvalued. The company's financial condition is fair and its profitability is strong. Its growth ranks in the middle range of the companies in the industry of Consumer Packaged Goods. To learn more about Bakkafrost P/F stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
