Worthington Industries Inc (WOR, Financial) has experienced a substantial daily loss of -36.46% and a 3-month decline of -40.01%, which may raise concerns or present opportunities for investors. With an Earnings Per Share (EPS) of 5.81, the critical question arises: is the stock significantly undervalued? This analysis aims to explore the valuation of Worthington Industries and provide insights into whether the current market price reflects the company's intrinsic value.
Worthington Industries Inc is an established American diversified metals manufacturing company, with a focus on value-added steel processing and a variety of manufactured metal products. The company's diverse product portfolio includes pressure cylinders, steel and fiberglass tanks, cryogenic pressure vessels, and light gauge steel framing. With a current share price of $45.56 and a market cap of $2.30 billion, Worthington Industries presents an interesting case when compared to its Fair Value (GF Value) of $67.84, suggesting a potential undervaluation.
Understanding the GF Value
The GF Value is a proprietary metric that assesses the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance, and future business performance estimates. The GF Value Line serves as a benchmark for the stock's fair trading value.
According to GuruFocus' exclusive valuation method, Worthington Industries (WOR, Financial) is significantly undervalued. The GF Value estimate is grounded on historical multiples, internal adjustments from past business growth, and future business performance projections. When a stock's price is well below the GF Value Line, it suggests that the stock may have high future returns. Currently, at $45.56 per share, Worthington Industries is positioned as significantly undervalued, indicating a promising long-term return potential that could surpass its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength and Stability
Investing in companies with robust financial strength minimizes the risk of capital loss. A company's financial health can be gauged by examining metrics such as the cash-to-debt ratio and interest coverage. Worthington Industries has a cash-to-debt ratio of 0.37, placing it in a less favorable position than 73.19% of its industry peers. Nevertheless, with a GuruFocus financial strength ranking of 7 out of 10, the company maintains a fair financial condition.
Profitability and Growth Prospects
Profitability is a key indicator of a company's risk profile, with consistent profitability over time being highly desirable. Worthington Industries has maintained profitability for the past decade, with a recent annual revenue of $4.70 billion and an Earnings Per Share (EPS) of 5.81. However, its operating margin of 5.4% is lower than 57.36% of its competitors in the Industrial Products industry. Despite this, the overall profitability rank of 8 out of 10 reflects the company's strong financial health.
Growth is a vital aspect of valuation, as it often correlates with a company's long-term stock performance. Worthington Industries has outperformed 83.77% of its industry with its 3-year average revenue growth rate. Additionally, its 3-year average EBITDA growth rate of 32.7% surpasses 82.47% of its industry counterparts, signaling robust growth potential.
ROIC vs. WACC: Measuring Value Creation
Comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is a way to assess a company's efficiency in creating value for shareholders. With a ROIC of 7.38 and a WACC of 11.11 over the past 12 months, Worthington Industries needs to improve its value creation to exceed its capital costs.
In Conclusion: An Investment Opportunity?
In summary, Worthington Industries (WOR, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong, with growth rates that are impressive within the Industrial Products industry. For a deeper understanding of Worthington Industries' financials, investors are encouraged to review its 30-Year Financials here.
To discover high-quality companies that may deliver above-average returns, consider exploring the GuruFocus High Quality Low Capex Screener.
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.
