Value-focused investors are incessantly seeking stocks priced below their intrinsic value. A stock that warrants attention is Ameresco Inc (AMRC, Financial), currently priced at $26.61. Despite recording a daily loss of 10.73% and a 3-month decrease of 46.81%, the stock's GF Value indicates a fair valuation of $60.54.
Understanding the GF Value
The GF Value represents a stock's current intrinsic value, derived from our unique methodology. It provides an overview of the fair value at which the stock should be trading. This value is calculated based on historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow), GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance.
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.
Delving Deeper: Unmasking the Risks
Despite its seemingly attractive valuation, Ameresco (AMRC, Financial) carries certain risk factors that investors should not overlook. These risks are primarily reflected through its low Altman Z-score of 1.31. These indicators suggest that Ameresco, despite its apparent undervaluation, might be a potential value trap. This complexity underlines the importance of thorough due diligence in investment decision-making.
Understanding Piotroski F-score and Altman Z-score
The Piotroski F-score is a tool used to assess a company's financial health. It is based on nine criteria that fall into three categories: profitability, leverage/liquidity/ source of funds, and operating efficiency. The overall score ranges from 0 to 9, with higher scores indicating healthier financials. Ameresco's current Piotroski F-Score, however, falls in the lower end of this spectrum, indicating potential red flags for investors.
The Altman Z-score is a financial model that predicts the probability of a company entering bankruptcy within a two-year time frame. The Altman Z-Score combines five different financial ratios, each weighted to create a final score. A score below 1.8 suggests a high likelihood of financial distress, while a score above 3 indicates a low risk.
Company Snapshot: Ameresco Inc (AMRC, Financial)
Ameresco Inc provides energy efficiency solutions for facilities in North America and Europe. It focuses on projects that reduce energy, also focuses on the operation and maintenance costs of governmental, educational, utility, healthcare, and other institutional, commercial, and industrial entities facilities. Ameresco distributes solar energy products and systems, such as PV panels, solar regulators, solar charge controllers, inverters, solar-powered lighting systems, solar-powered water pumps, solar panel mounting hardware, and other system components. The company's segment includes U.S. Regions; U.S. Federal; Canada; Alternative Fuels; Non-Solar DG and All Other. It derives a majority of revenue from the U.S. Regions segment.
Ameresco's Low Altman Z-Score: A Breakdown of Key Drivers
A dissection of Ameresco's Altman Z-score reveals Ameresco's financial health may be weak, suggesting possible financial distress. The Retained Earnings to Total Assets ratio provides insights into a company's capability to reinvest its profits or manage debt. Evaluating Ameresco's historical data, 2021: 0.20; 2022: 0.17; 2023: 0.18, we observe a declining trend in this ratio. This downward movement indicates Ameresco's diminishing ability to reinvest in its business or effectively manage its debt. Consequently, it exerts a negative impact on its Z-Score.
Conclusion
Despite its seemingly attractive valuation, Ameresco (AMRC, Financial) might be a potential value trap due to the risks associated with its financial health. Thorough due diligence is crucial for investors to navigate the thin line between value and trap.
GuruFocus Premium members can find stocks with high Piotroski F-score using the following Screener: Piotroski F-score screener .
GuruFocus Premium members can find stocks with high Altman Z-Score using the following Screener: Walter Schloss Screen .
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.
