Ultrapar Participacoes SA (UGP, Financial) has recently seen a daily gain of 3.38%, with a 3.4% increase over the past three months. Its Earnings Per Share (EPS) stands at 0.24. The question that arises is whether the stock is fairly valued. This article will provide an in-depth valuation analysis, aiming to answer this question. Let's dive into the financials of Ultrapar Participacoes SA.
Company Overview
Ultrapar Participacoes SA is a company that invests in services, commercial, and industrial activities. It operates in three business segments: gas distribution, fuel distribution, and storage. The company's stock price is currently $3.67, with a market cap of $4 billion. The GF Value, an estimate of fair value, is $3.84, indicating that the stock might be fairly valued. Let's explore this further.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock, derived from our exclusive method. It is calculated based on historical multiples, GuruFocus adjustment factor, and future estimates of business performance. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Ultrapar Participacoes SA's stock shows signs of being fairly valued according to the GuruFocus Value calculation. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Ultrapar Participacoes SA has a cash-to-debt ratio of 0.4, which ranks worse than 55.73% of 1021 companies in the Oil & Gas industry. GuruFocus ranks Ultrapar Participacoes SA's financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Ultrapar Participacoes SA has been profitable 10 over the past 10 years. Its operating margin is 2.19%, which ranks worse than 67.63% of 967 companies in the Oil & Gas industry. The average annual revenue growth of Ultrapar Participacoes SA is19.8%, which ranks better than 70.24% of 850 companies in the Oil & Gas industry.
ROIC vs 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. Ultrapar Participacoes SA's return on invested capital is 9.82, and its cost of capital is 9.72.
Conclusion
Overall, Ultrapar Participacoes SA (UGP, Financial) stock shows every sign of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks worse than 53.29% of 820 companies in the Oil & Gas industry. To learn more about Ultrapar Participacoes SA stock, you can check out its 30-Year Financials here.
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