With a daily gain of 5.98%, a 3-month loss of -6.38%, and an Earnings Per Share (EPS) of 0.99, Ameresco Inc (AMRC, Financial) catches the eye of value investors. But is the stock modestly undervalued? To answer this question, we delve into a comprehensive valuation analysis. Stay tuned as we unravel the intrinsic value of Ameresco (AMRC).
Introducing Ameresco Inc (AMRC, Financial)
Ameresco Inc provides energy efficiency solutions for facilities across North America and Europe. The company focuses on projects that reduce energy and operation and maintenance costs of various institutional, commercial, and industrial entities facilities. Ameresco's segment includes U.S. Regions; U.S. Federal; Canada; Alternative Fuels; Non-Solar DG and All Other. The U.S. Regions segment generates the majority of its revenue.
As of September 14, 2023, Ameresco (AMRC, Financial) is trading at $46.78 per share, while its GF Value, an estimation of fair value, stands at $58.48. This comparison suggests that the stock might be modestly undervalued.
Ameresco's GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at. This value is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates.
Considering these factors, our GF Value suggests that Ameresco's stock appears to be modestly undervalued. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued and have higher future returns.
Given Ameresco's current undervaluation, the long-term return of its stock is likely to be higher than its business growth.
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Assessing Ameresco's Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's essential to review a company's financial strength before deciding to buy shares. Ameresco has a cash-to-debt ratio of 0.04, ranking worse than 94.6% of 1610 companies in the Construction industry. Based on this, GuruFocus ranks Ameresco's financial strength as 4 out of 10, suggesting a poor balance sheet.
Ameresco's Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Ameresco has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.40 billion and Earnings Per Share (EPS) of $0.99. Its operating margin is 6.44%, ranking better than 61.03% of 1614 companies in the Construction industry. Overall, the profitability of Ameresco is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. Ameresco's 3-year average annual revenue growth rate is 23.6%, ranking better than 88.36% of 1555 companies in the Construction industry. The 3-year average EBITDA growth rate is 22.9%, ranking better than 78.51% of 1326 companies in the Construction industry.
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 exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Ameresco's ROIC is 3.69 while its WACC came in at 13.09.
Conclusion
In conclusion, Ameresco's stock appears to be modestly undervalued. Despite its poor financial condition, its profitability is strong and its growth ranks better than 78.51% of 1326 companies in the Construction industry. To learn more about Ameresco stock, you can check out its 30-Year Financials here.
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