Howmet Aerospace Inc (HWM, Financial) has recently been under the investor's microscope, with a daily gain of 1.59% and a 3-month gain of 1.82%. With an Earnings Per Share (EPS) of $1.52, the question arises: is the stock fairly valued? To determine this, we delve into a valuation analysis that will shed light on Howmet Aerospace's current market position. Read on as we explore the factors contributing to its valuation.
Company Introduction
Howmet Aerospace Inc is a prominent player in the aerospace, commercial transportation, and industrial sectors, offering innovative solutions such as advanced cooling airfoils, specialty fasteners, and lightweight aluminum wheels. With a current share price of $50.34 and a Fair Value (GF Value) of $46.33, we compare the stock price to its estimated fair value, providing a foundational analysis of the company's intrinsic worth.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated through historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. Howmet Aerospace (HWM, Financial) appears to be fairly valued according to this method, with its stock price closely aligning with the GF Value Line. This alignment suggests that the long-term return of its stock is likely to mirror the rate of its business growth, indicating a stable investment opportunity.
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Financial Strength
When considering an investment, the financial strength of a company is paramount to avoid potential capital loss. Howmet Aerospace's cash-to-debt ratio of 0.11 positions it below many of its industry peers. This metric leads to a financial strength rating of 5 out of 10 by GuruFocus, signifying a fair balance sheet that warrants investor attention.
Profitability and Growth
Howmet Aerospace's track record of profitability over 6 of the past 10 years underscores its potential for less risky investment. With a robust operating margin that surpasses most competitors in the Aerospace & Defense industry, the company's financial performance is commendable. However, its growth metrics reveal a mixed picture, with revenue growth trailing behind 70.19% of industry counterparts, although its EBITDA growth rate is more competitive.
ROIC vs. WACC
Evaluating Howmet Aerospace's profitability involves comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). The company's ROIC of 10.02 is currently below its WACC of 11.08, suggesting that it may not be generating sufficient cash flow relative to the capital invested.
Conclusion
Overall, Howmet Aerospace (HWM, Financial) stock appears to be fairly valued. The company's fair financial condition, solid profitability, and competitive growth place it in a stable position within the Aerospace & Defense industry. For those interested in a deeper financial analysis, Howmet Aerospace's 30-Year Financials are available for review.
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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.
