Johnson Controls International PLC (JCI, Financial) has experienced a notable daily loss of 5.97%, and a 3-month decline of 6.75%. Despite these setbacks, the company maintains an Earnings Per Share (EPS) of $2.99. Investors and analysts are keen to understand: Is the stock modestly undervalued? This article delves into a valuation analysis of Johnson Controls International PLC to uncover the answer.
Company Introduction
Johnson Controls International PLC is a global leader in delivering products and services for HVAC systems, building management, industrial refrigeration, and fire and security solutions. With a significant portion of its revenue derived from commercial HVAC and fire and security, the company's operations span across various sectors. The recent market cap of $36.20 billion and a stock price of $53.19, when juxtaposed with the GF Value of $70.72, suggest that the stock might be trading below its intrinsic value. This valuation gap warrants a closer examination of the company's financial health and market position.
Understanding the GF Value
The GF Value is a unique metric, reflecting the intrinsic worth of a stock, calculated through an exclusive methodology. It incorporates historical trading multiples, an adjustment factor based on the company's past performance, and projected business outcomes. The GF Value Line serves as a benchmark for the stock's fair trading value. If a stock price significantly deviates from this line, it could indicate an overvaluation or undervaluation, influencing its future returns.
Johnson Controls International PLC's current price suggests that it is modestly undervalued, implying a potentially higher long-term return compared to its business growth. The GF Value, our fair value estimate, considers the stock's historical trading patterns, business expansion, and future business prospects.
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Financial Strength Assessment
Before investing, assessing a company's financial strength is crucial. Johnson Controls International PLC's cash-to-debt ratio of 0.11 places it below 85.13% of its industry peers, indicating a need for cautious evaluation. With an overall financial strength rating of 6 out of 10, the company's financial health is deemed fair, but investors should consider the potential risks associated with its debt levels.
Profitability and Growth Insights
Investing in profitable companies typically carries less risk. Johnson Controls International PLC has shown consistent profitability, with a 9-year track record of profits out of the past 10 years. The company's operating margin of 10.6% is commendable, surpassing 76.91% of its industry counterparts. Furthermore, its growth trajectory is impressive, with an average annual revenue growth rate of 9.7%, ranking favorably within the industry.
ROIC vs. WACC Analysis
Comparing Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is a vital measure of profitability. Johnson Controls International PLC's ROIC of 9.33 versus its WACC of 9.8 suggests that it may be struggling to generate sufficient cash flow relative to the capital invested. This comparison is a critical factor for potential investors to consider.
Conclusive Overview
Overall, Johnson Controls International PLC appears to be modestly undervalued. The company's financial condition and profitability are deemed fair, and its growth prospects rank well within the industry. For a more detailed exploration of Johnson Controls International PLC's financials, interested parties can review its 30-Year Financials here.
Investment Opportunities
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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.
