Despite a daily loss of 4.6% and a three-month loss of 11.6%, CNH Industrial NV (CNHI, Financial) maintains an Earnings Per Share (EPS) (EPS) of 1.71. The question at hand is whether the stock is modestly undervalued. This article will delve into the valuation analysis of CNH Industrial NV (CNHI), providing valuable insights for potential investors.
A Glimpse at CNH Industrial NV
As a global manufacturer of heavy machinery, CNH Industrial NV boasts a variety of products, including agricultural and construction equipment. Its most recognizable brand, Case IH, has served farmers for generations. With a robust dealer network of over 3,600 dealer and distribution locations globally, CNH Industrial NV ensures its products are widely accessible. Its finance arm further bolsters product sales by providing retail financing for equipment to customers and wholesale financing for dealers.
Currently, the stock price of CNH Industrial NV stands at $12.76, with a market cap of $17 billion. This is compared to the GF Value, an estimation of the stock's fair value, of $17.72. This indicates that the stock could be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from three factors: historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at.
According to GuruFocus Value calculation, the stock of CNH Industrial NV appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Assessing CNH Industrial NV's Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. CNH Industrial NV has a cash-to-debt ratio of 0.13, which is lower than 82.69% of 208 companies in the Farm & Heavy Construction Machinery industry. This indicates that the financial strength of CNH Industrial NV is fair.
Profitability and Growth of CNH Industrial NV
Companies that have consistently been profitable over the long term offer less risk for investors. CNH Industrial NV has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $24.70 billion and an EPS of $1.71. Its operating margin is 18.93%, ranking better than 93.78% of 209 companies in the Farm & Heavy Construction Machinery industry. This suggests fair profitability.
Growth is a key factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders. The 3-year average annual revenue growth rate of CNH Industrial NV is -5.9%, which ranks worse than 79.31% of 203 companies in the Farm & Heavy Construction Machinery industry. The 3-year average EBITDA growth rate is 7.3%, which ranks worse than 53.33% of 180 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can help evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, CNH Industrial NV's ROIC was 11.52, while its WACC was 7.93.
Conclusion
In summary, the stock of CNH Industrial NV (CNHI, Financial) appears to be modestly undervalued. Its financial condition and profitability are both fair. However, its growth ranks worse than 53.33% of 180 companies in the Farm & Heavy Construction Machinery industry. To learn more about CNH Industrial NV stock, you can check out its 30-Year Financials here.
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