Today, we delve into the financial landscape of Axalta Coating Systems Ltd (AXTA, Financial), a renowned manufacturer, marketer, and distributor of high-performance coating systems. With a recent day's gain of 8.81%, a 3-month loss of 11.21%, and an Earnings Per Share (EPS) (EPS) of 1.02, we are tasked with deciphering whether Axalta Coating Systems is modestly undervalued. This comprehensive analysis will provide a clear picture of Axalta's financial health, profitability, and growth prospects. Let's dive in.
Axalta Coating Systems operates in two segments: Performance Coatings and Mobility Coatings. The former provides liquid and powder coatings solutions to a fragmented and local customer base, with end markets including refinish and industrial. The latter offers coating technologies to original equipment manufacturers of light and commercial vehicles. The company operates across North America, EMEA countries, Asia-Pacific, and Latin America.
Currently, Axalta Coating Systems' stock price stands at $28.54, while the GF Value, an estimation of fair value, is pegged at $33.7. With a market cap of $6.30 billion, the stock appears to be modestly undervalued. Here's a look at Axalta Coating Systems' income breakdown:
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page indicates the stock's ideal fair trading value.
If the stock price is significantly above the GF Value Line, it is considered 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 Axalta Coating Systems' current price of $28.54 per share and a market cap of $6.30 billion, it appears to be modestly undervalued. This implies that the long-term return of its stock is likely to be higher than its business growth.
Axalta Coating Systems' Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Axalta Coating Systems' cash-to-debt ratio is 0.15, ranking worse than 83.81% of 1507 companies in the Chemicals industry. Overall, Axalta Coating Systems' financial strength is 4 out of 10, indicating poor financial health.
Profitability and Growth
Consistent profitability over the long term offers less risk for investors. Axalta Coating Systems has been profitable 9 out of the past 10 years. Over the past twelve months, the company had a revenue of $5.10 billion and an Earnings Per Share (EPS) of $1.02. Its operating margin is 9.82%, ranking better than 65.24% of 1522 companies in the Chemicals industry. Overall, the profitability of Axalta Coating Systems is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth of Axalta Coating Systems is 4.9%, ranking worse than 66.6% of 1449 companies in the Chemicals industry. The 3-year average EBITDA growth rate is -4.2%, ranking worse than 76.15% of 1342 companies in the Chemicals industry, indicating poor growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can 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 the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Axalta Coating Systems' ROIC over the past 12 months is 7.47, while its WACC came in at 9.14.
In conclusion, Axalta Coating Systems (AXTA, Financial) appears to be modestly undervalued. The company's financial condition is poor, its profitability is fair, and its growth ranks worse than 76.15% of companies in the Chemicals industry. For more detailed financial data on Axalta Coating Systems, 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.