TORM PLC (TRMD, Financial) witnessed a daily gain of 4.36% and a 3-month gain of 18.28%. However, the question remains: Is the stock significantly overvalued? With an Earnings Per Share (EPS) of 9.3, this article aims to provide a comprehensive valuation analysis of TORM PLC. Let's dive into the details.
Company Introduction
TORM PLC operates as a shipping company, primarily engaged in the transportation of refined oil products. With a market cap of $2.30 billion, the company's stock price stands at $27.07 per share, significantly higher than its GF Value of $20.09. This discrepancy prompts us to delve deeper into the company's value and assess its financial performance.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. 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.
For TORM PLC, the stock is estimated to be significantly overvalued. The GF Value estimates the stock's fair value at $20.09, which is significantly lower than its current price of $27.07. This discrepancy suggests that the long-term return of TORM PLC's stock is likely to be much lower than its future business growth.
Financial Strength Analysis
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. TORM PLC's cash-to-debt ratio stands at 0.23, which is lower than 66.44% of 1031 companies in the Oil & Gas industry. The overall financial strength of TORM PLC is ranked 6 out of 10, indicating fair financial strength.
Profitability and Growth
Companies with consistent profitability offer less risk for investors. TORM PLC has been profitable 6 out of the past 10 years, with an operating margin of 48.52%, ranking better than 89.81% of 981 companies in the Oil & Gas industry. The profitability of TORM PLC is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in a company's valuation. The average annual revenue growth of TORM PLC is 24.8%, ranking better than 77.67% of 860 companies in the Oil & Gas industry. The 3-year average EBITDA growth is 30%, ranking better than 67.63% of 828 companies in the Oil & Gas industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. TORM PLC's ROIC stands at 35.11, significantly exceeding its WACC of 6.45. This suggests that the company is creating value for its shareholders.
Conclusion
In conclusion, TORM PLC (TRMD, Financial) is estimated to be significantly overvalued. Despite its fair financial condition and profitability, the stock's current price exceeds its intrinsic value, suggesting potential risks for investors. For more details about TORM PLC's financials, you can check out its 30-Year Financials here.
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