With a daily loss of -2.09% and a three-month gain of 18.2%, Baker Hughes Co (BKR, Financial) has been on a roller coaster ride. The company's Earnings Per Share (EPS) stands at 1.13, raising questions about its valuation. Is the stock significantly overvalued? This article provides an in-depth analysis to answer this question. Let's delve into the details of Baker Hughes Co's valuation.
Introducing Baker Hughes Co (BKR, Financial)
Baker Hughes Co is a global leader in oilfield services and equipment, specializing in artificial lift, specialty chemicals, and completions markets. With a significant presence in offshore oil and gas production and industrial power generation, the company's operations are vast and diversified. The stock is currently trading at $35.83 per share, with a market cap of $36.20 billion. However, the GF Value, an estimation of the stock's fair value, stands at $23.35. This discrepancy prompts a closer look at Baker Hughes Co's intrinsic value.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price significantly exceeds the GF Value Line, the stock is overvalued, and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, its future return will likely be higher.
According to the GF Value, Baker Hughes Co appears to be significantly overvalued. The company's future return could be much lower than its future business growth due to this overvaluation.
Financial Strength of Baker Hughes Co
Before investing in a company, it's crucial to assess its financial strength. Companies with weak financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are useful indicators of a company's financial strength. Baker Hughes Co's cash-to-debt ratio stands at 0.42, ranking it lower than 53.38% of 1034 companies in the Oil & Gas industry. Its overall financial strength is rated 6 out of 10, indicating fair financial health.
Profitability and Growth of Baker Hughes Co
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. Baker Hughes Co has been profitable for 3 years over the past 10 years. The company had revenues of $23.30 billion and Earnings Per Share (EPS) of $1.13 in the past 12 months. Its operating margin of 9.89% is better than 53.56% of 984 companies in the Oil & Gas industry.
Growth is a critical factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders. However, Baker Hughes Co's 3-year average annual revenue growth rate stands at -20.6%, ranking it lower than 89.79% of 862 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. Baker Hughes Co's ROIC is 5.25 while its WACC came in at 9.34.
Conclusion
In summary, Baker Hughes Co (BKR, Financial) appears to be significantly overvalued. The company's financial condition is fair, and its profitability is fair. However, its growth ranks lower than 90.84% of 830 companies in the Oil & Gas industry. To learn more about Baker Hughes Co's stock, you can check out its 30-Year Financials here.
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