Central Garden & Pet Co (CENT, Financial) has experienced a notable dip, with a daily loss of -9.94% and a 3-month decline of -9.79%. Despite this, the company boasts an Earnings Per Share (EPS) of $2.26. This raises a critical question for investors: Is Central Garden & Pet Co (CENT) modestly undervalued? To address this, we will delve into a thorough valuation analysis, inviting readers to explore the financial intricacies that define Central Garden & Pet Co's market position.
Central Garden & Pet Co has a rich history of nurturing happy and healthy homes for over four decades. As a market leader in the pet and garden industries, the company boasts a portfolio of over sixty-five trusted brands, including Pennington and Nylabone, and has a strong presence in manufacturing and distribution. With a current stock price of $39.52 and a market cap of $2 billion, Central Garden & Pet Co stands against a GF Value of $48.69. This comparison sets the stage for an in-depth valuation analysis, intertwining financial assessment with the company's fundamental strengths.
Summarize GF Value
The GF Value is a proprietary measure reflecting the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line indicates the fair trading value of a stock. Central Garden & Pet Co (CENT, Financial) appears modestly undervalued, suggesting that the long-term return of its stock could outpace its business growth. The GF Value estimation underscores the potential for higher future returns when a stock is priced below this line.
When considering an investment, the financial strength of a company is crucial to avoid potential capital loss. Central Garden & Pet Co's cash-to-debt ratio is 0.24, placing it in a less favorable position than 64.58% of its peers in the Consumer Packaged Goods industry. With this in mind, GuruFocus assigns a financial strength rating of 6 out of 10, indicating a fair balance sheet.
Profitability and Growth
Profitability is a less risky indicator of a company's performance, particularly when it has been consistent over time. Central Garden & Pet Co has a solid track record, being profitable for 9 of the last 10 years. With annual revenues of $3.30 billion and an EPS of $2.26, its operating margin outperforms 58.29% of competitors. This strong profitability is complemented by impressive growth metrics. Central Garden & Pet Co's 3-year average annual revenue growth rate is 14%, ranking higher than 71.43% of its industry peers. The EBITDA growth rate of 18.9% also stands out, surpassing 69.67% of competitors.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to its capital costs. Central Garden & Pet Co's ROIC over the past 12 months is 5.96, slightly below its WACC of 6.48, suggesting that the company needs to improve its capital efficiency to create more value for shareholders.
In conclusion, Central Garden & Pet Co (CENT, Financial) presents signs of being modestly undervalued. The company's fair financial condition, strong profitability, and above-average industry growth rates make it an attractive prospect for value investors. For a deeper understanding of Central Garden & Pet Co's financial journey, interested parties can explore the company's 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.