Unveiling Valmont Industries (VMI)'s Value: Is It Really Priced Right? A Comprehensive Guide

Is Valmont Industries (VMI) significantly undervalued? An in-depth exploration of its intrinsic value and future prospects.

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Valmont Industries Inc (VMI, Financial) has experienced a daily loss of 13.95% and a 3-month loss of 29.24%. Despite these losses, the company's Earnings Per Share (EPS) stands at 12.88. Given these figures, the question arises - is Valmont Industries (VMI) significantly undervalued? In this article, we present a comprehensive valuation analysis of Valmont Industries to answer this question. Let's delve in.

Company Introduction

Founded in 1946, Valmont Industries Inc (VMI, Financial) has grown into a global leader in designing and manufacturing highly engineered products and services that support infrastructure development and agricultural productivity. The company operates in two primary business segments: Agriculture and Infrastructure. With 85 manufacturing facilities in 22 countries, Valmont Industries does business in over 100 countries across six continents.

As of October 26, 2023, the company's stock price stands at $199.05, while its intrinsic value, as per the GF Value, is estimated at $315.32. This discrepancy suggests that Valmont Industries (VMI, Financial) may be significantly undervalued. To understand this valuation better, let's take a look at the company's income breakdown:

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Understanding GF Value

The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It's calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.

According to GuruFocus Value calculation, Valmont Industries (VMI, Financial) is significantly undervalued. The stock's current price of $199.05 per share and a market cap of $4.20 billion suggests that its future return is likely to be much higher than its business growth.

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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. Factors like the cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. Valmont Industries has a cash-to-debt ratio of 0.15, which is lower than 76.77% of 495 companies in the Conglomerates industry. The overall financial strength of Valmont Industries is 6 out of 10, indicating fair financial health.

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Profitability and Growth

Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Valmont Industries has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $4.30 billion and Earnings Per Share (EPS) of $12.88. Its operating margin is 10.88%, which ranks better than 73.59% of 496 companies in the Conglomerates industry. Overall, the profitability of Valmont Industries is ranked 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 Valmont Industries is 16.6%, which ranks better than 76.92% of 468 companies in the Conglomerates industry. The 3-year average EBITDA growth rate is 16.8%, which ranks better than 57.64% of 406 companies in the Conglomerates industry.

ROIC vs WACC

Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Valmont Industries's ROIC was 11.27, while its WACC came in at 9.15.

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Conclusion

Overall, Valmont Industries (VMI, Financial) stock is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 57.64% of 406 companies in the Conglomerates industry. To learn more about Valmont Industries 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.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure