On October 23, 2023, FMC Corp (FMC, Financial) experienced a day's loss of -17.15%, contributing to a 3-month loss of -29.38%. Despite these downturns, the company's Earnings Per Share (EPS) stands at 4.91. These figures provoke the question: Is FMC significantly undervalued? This article delves into a comprehensive valuation analysis of FMC, providing value investors with insightful data to make informed decisions. We invite you to read on to uncover FMC's true worth.
Company Introduction
FMC Corp (FMC, Financial), a pure-play crop chemical company, has strategically diversified its sales to create a balanced crop chemical portfolio across geographies and crop exposure. Through acquisitions, FMC has become one of the five largest patented crop chemical companies and continues to focus on developing new products, particularly biologicals, through its research and development pipeline. Despite its current stock price of $55.47, the GF Value, an estimation of fair value, stands at $123.95, suggesting that FMC may be significantly undervalued.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides a quick view of the fair value at which the stock should ideally be traded. 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.
Given FMC's current price of $55.47 per share and the market cap of $6.90 billion, FMC stock appears to be significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
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Evaluating FMC's Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's crucial to research and review a company's financial strength before purchasing shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. FMC has a cash-to-debt ratio of 0.2, which ranks worse than 73.58% of 246 companies in the Agriculture industry. The overall financial strength of FMC is 5 out of 10, indicating that the financial strength of FMC is fair.
Assessing Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. FMC has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $5.40 billion and Earnings Per Share (EPS) of $4.91. Its operating margin is 19.87%, which ranks better than 85.54% of 242 companies in the Agriculture industry. Overall, GuruFocus ranks FMC's profitability at 8 out of 10, indicating strong profitability.
Growth is a critical 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. The 3-year average annual revenue growth rate of FMC is 9.5%, which ranks worse than 65.35% of 228 companies in the Agriculture industry. The 3-year average EBITDA growth rate is 12.1%, which ranks worse than 59.09% of 220 companies in the Agriculture industry.
ROIC vs. WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If ROIC exceeds WACC, the company is likely creating value for its shareholders. During the past 12 months, FMC's ROIC was 11.46 while its WACC came in at 7.36.
Conclusion
In summary, the stock of FMC Corp (FMC, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 59.09% of 220 companies in the Agriculture industry. To learn more about FMC stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
