Acuity Brands Inc (AYI, Financial) experienced a daily gain of 6.52% and a 3-month gain of 2.63%. The company's Earnings Per Share (EPS) stands at 11.62. But, is the stock fairly valued? This article aims to answer this question through an in-depth valuation analysis. So, let's dive in.
Company Introduction
Acuity Brands Inc is the parent company of Acuity Brands Lighting and other subsidiaries, providing lighting products for commercial, institutional, industrial, and residential applications. These products include luminaires, lighting controls, lighting components, and integrated lighting systems that use a combination of light sources. The majority of the firm's revenue is generated in the United States. The company's stock price stands at $178.29, while the GF Value, an estimation of fair value, is $195.65. This comparison paves the way for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value represents the intrinsic value of a stock derived from our proprietary method. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. The calculation is based on three factors: historical multiples, a GuruFocus adjustment factor, and future estimates of business performance.
Acuity Brands (AYI, Financial) appears to be fairly valued, according to GuruFocus Value calculation. It is calculated based on the historical multiples that the stock has traded at, the past business growth, and analyst estimates of future business performance. With its current price of $178.29 per share and a market cap of $5.60 billion, Acuity Brands stock appears to be fairly valued. As it is fairly valued, 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, so it's crucial to review a company's financial strength before buying shares. Acuity Brands has a cash-to-debt ratio of 0.61, ranking worse than 63.65% of 2839 companies in the Industrial Products industry. Based on this, GuruFocus ranks Acuity Brands's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Acuity Brands has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4.10 billion and Earnings Per Share (EPS) of $11.62. Its operating margin is 12.84%, which ranks better than 76.43% of 2893 companies in the Industrial Products industry. Overall, GuruFocus ranks the profitability of Acuity Brands at 8 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. The 3-year average annual revenue growth rate of Acuity Brands is 7.8%, which ranks better than 54.54% of 2734 companies in the Industrial Products industry. The 3-year average EBITDA growth rate is 8.8%, which ranks worse than 50.78% of 2426 companies in the Industrial Products 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. For the past 12 months, Acuity Brands's return on invested capital is 14.56, and its cost of capital is 14.01.
Conclusion
In summary, the stock of Acuity Brands Inc (AYI, Financial) appears to be fairly valued. The company's financial condition is strong, and its profitability is strong. Its growth ranks worse than 50.78% of 2426 companies in the Industrial Products industry. To learn more about Acuity Brands stock, you can check out its 30-Year Financials here.
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