Quanex Building Products Corp (NX, Financial) recently experienced a notable daily loss of 10.92%, yet it still boasts a 3-month gain of 10.51%. With an Earnings Per Share (EPS) of $2.42, investors are contemplating whether the stock is modestly overvalued. As we delve into the valuation analysis, we'll explore the factors that contribute to its current market position and future potential.
Company Introduction
Quanex Building Products Corp is a key player in the building products industry, manufacturing essential components for original equipment manufacturers. Its product range includes window components, vinyl profiles, door screens, solar panel sealants, and precision metal and wood products. With North American Fenestration as its primary revenue source, Quanex Building Products derives the majority of its income from the U.S. market. When considering the stock's current price of $30.91 against the GF Value of $24.61, it's crucial to assess whether the stock is fairly valued.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock, considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, as well as future business performance estimates. If a stock's price significantly exceeds the GF Value Line, it's considered overvalued and may yield poor future returns. Conversely, if it's below the GF Value Line, the potential for future returns is higher. At a market cap of $1 billion, Quanex Building Products (NX, Financial) appears modestly overvalued, which could imply that its long-term stock return may not align with its business growth.
Financial Strength
Investors must scrutinize a company's financial strength to avoid potential capital loss. Quanex Building Products has a cash-to-debt ratio of 0.47, positioning it lower than 56.31% of its peers in the construction sector. Despite this, its strong balance sheet is reflected in a financial strength rating of 8 out of 10 by GuruFocus.
Profitability and Growth
Profitability is a less risky proposition, particularly for companies with a long history of consistent earnings. Quanex Building Products has been profitable for 7 out of the last 10 years. With $1.10 billion in revenue and an operating margin surpassing 70.37% of its competitors, its profitability is deemed fair. Moreover, the company's average annual revenue growth of 10.7% outperforms 71.53% of companies in the construction industry, while its 3-year average EBITDA growth of 86.7% is better than 96.69% of its peers.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is essential in assessing profitability. Quanex Building Products has an ROIC of 13.85%, higher than its WACC of 9.53%, indicating value creation for shareholders.
Conclusion
In summary, Quanex Building Products (NX, Financial) appears modestly overvalued. Its robust financial condition, fair profitability, and impressive growth trajectory suggest a promising outlook. For a detailed analysis, investors can review Quanex Building Products' 30-Year Financials.
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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.
