With a daily gain of 3.89% and a three-month gain of 0.43%, Hubbell Inc (HUBB, Financial) presents an interesting case for investors examining the current stock market dynamics. Boasting an Earnings Per Share (EPS) of 13.16, the question arises: is Hubbell modestly overvalued? In the following analysis, we delve into the valuation of Hubbell to provide readers with a comprehensive understanding of its financial standing.
Company Introduction
Hubbell Inc (HUBB, Financial) is a diversified conglomerate industrial company, primarily competing in the electrical components market. Its products and services are crucial to various segments of the U.S. electrical supply chain, including transmission and distribution as well as commercial, industrial, and residential end markets. Operating in two segments—electrical and power systems—Hubbell sells approximately two-thirds of its products through distributors, while the rest are sold directly to utilities and contractors. The acquisition of Aclara in 2018 significantly enhanced Hubbell's portfolio, adding smart meters and communication sensors catered to electrical, water, and gas utilities. When juxtaposed with the current stock price of $300.86 and a market cap of $16.10 billion, the GF Value of $271.74 suggests that Hubbell may be modestly overvalued.
Summarize GF Value
The GF Value is a proprietary metric that reflects the intrinsic value of a stock, calculated through a unique methodology. This includes an analysis of historical trading multiples, an adjustment factor based on past performance and growth, and projections of future business performance. The GF Value Line provides a benchmark for the stock's fair trading value. If Hubbell's stock price significantly exceeds the GF Value Line, it may be overvalued, potentially leading to poor future returns. Conversely, if the price is well below this line, the stock may be undervalued, potentially resulting in higher future returns. With Hubbell's shares trading at $300.86, the indication is that the stock is modestly overvalued, which could mean a lower long-term return than the company's business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid capital loss. Hubbell's cash-to-debt ratio of 0.37 ranks lower than 73.65% of its industry peers, suggesting some caution is warranted. Nevertheless, with a financial strength rating of 7 out of 10, Hubbell's balance sheet remains fair.
Profitability and Growth
Profitable companies, especially those with a consistent track record, are generally considered safer investments. Hubbell has been profitable for the past decade, with a revenue of $5.20 billion and an Earnings Per Share (EPS) of $13.16 over the last twelve months. Its impressive operating margin of 18.77% surpasses 89.81% of its industrial product industry counterparts. The company's profitability is rated 9 out of 10, reflecting its strong standing in the market.
Growth is a pivotal factor in a company's valuation, correlating significantly with long-term stock performance. Hubbell's 3-year average revenue growth rate surpasses 55.41% of the industry, while its 3-year average EBITDA growth rate of 8.6% is lower than 51.73% of its peers, presenting a mixed growth outlook.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can reveal its profitability relative to the capital invested. Hubbell's ROIC of 18.58% over the past year significantly exceeds its WACC of 8.8%, indicating value creation for shareholders.
Conclusion
In conclusion, while Hubbell (HUBB, Financial) appears to be modestly overvalued, it maintains a fair financial condition and strong profitability. However, its growth ranking is slightly below average within the Industrial Products industry. For a more detailed exploration of Hubbell's financials, interested investors can review 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.
