Quanex Building Products Corp (NX, Financial) has recently experienced a daily loss of -3.23%, yet it boasts a 3-month gain of 5.86%. With an Earnings Per Share (EPS) of $2.63, investors are prompted to consider whether the stock is significantly overvalued. This article delves into the valuation analysis of Quanex Building Products, aiming to provide a detailed examination of its financial worth in the current market.
Company Introduction
Quanex Building Products Corp is a leading manufacturer of components for the building products industry. It specializes in engineered products such as window and door components, including flexible insulating glass spacers, extruded vinyl profiles, window and door screens, solar panel sealants, and precision-formed metal and wood products. Its operations are segmented into North American Fenestration, European Fenestration, and North American Cabinet Components, with the majority of revenue derived from the United States. With its current stock price of $33.52 and a market cap of $1.10 billion, a comparison with the GF Value will reveal the stock's alignment with its fair value.
Summarize GF Value
The GF Value is a unique metric that calculates the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This value serves as a benchmark for determining whether a stock is traded at its fair value.
Quanex Building Products (NX, Financial) appears to be significantly overvalued according to the GF Value, which suggests that the long-term return of its stock may be lower than its future business growth. At a price of $33.52 per share and a GF Value of $24.15, the stock is trading well above its estimated fair value.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Quanex Building Products' cash-to-debt ratio of 0.4 places it in a less favorable position than 62.18% of its peers in the Construction industry. Despite this, its financial strength is rated 8 out of 10, indicating a strong balance sheet.
Profitability and Growth
Quanex Building Products has maintained profitability for 8 of the past 10 years, with an impressive operating margin of 10.31%, ranking better than 74.88% of companies in the Construction industry. This level of consistent profitability is a positive sign for investors, and the company's profitability rank stands at 8 out of 10.
The company's growth is also a significant factor in its valuation. With a 3-year average annual revenue growth rate of 9.7% and an EBITDA growth rate of 12.7%, Quanex Building Products is outperforming 63% of companies in its industry, indicating a strong potential for creating shareholder value.
ROIC vs WACC
An effective way to assess a company's profitability is to compare its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Quanex Building Products' ROIC of 14.59% is significantly higher than its WACC of 9.88%, indicating that it is generating substantial value for its shareholders.
Conclusion
In conclusion, Quanex Building Products (NX, Financial) appears to be significantly overvalued based on the GF Value. However, the company's strong financial health, robust profitability, and solid growth prospects should not be overlooked. For a more comprehensive understanding of Quanex Building Products' financials, interested investors can review the 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.
