With a recent daily gain of 2.98% and a notable three-month gain of 26.3%, Johnson Controls International PLC (JCI, Financial) has been a topic of interest among investors. Adding to its appeal is an Earnings Per Share (EPS) of 2.47. A crucial question arises: is JCI fairly valued? This article delves into the valuation of JCI, urging readers to explore the detailed analysis that follows.
Company Overview
Johnson Controls International PLC operates in a sector crucial to modern infrastructure, manufacturing, installing, and servicing essential systems such as HVAC, building management, industrial refrigeration, and fire and security solutions. With commercial HVAC making up over 45% of its sales and fire and security solutions about 40%, the company plays a pivotal role in its industry. In fiscal 2023, Johnson Controls reported nearly $27 billion in revenue. A comparison between its current stock price and the GF Value, which is pegged at $66.68, suggests that the stock is fairly valued. This sets the stage for a deeper exploration of JCI's intrinsic worth.
Understanding GF Value
The GF Value is a proprietary measure designed to estimate the fair value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. According to this metric, Johnson Controls International PLC is currently fairly valued. The GF Value suggests that the stock should ideally trade around this value, considering its historical and expected performance metrics. If a stock trades significantly above this line, it might be overvalued, and if below, potentially undervalued, offering a higher future return.
Financial Strength and Stability
Investors must consider the financial health of a company before investing, as weak financial strength could lead to permanent capital loss. Johnson Controls International PLC's cash-to-debt ratio of 0.08 ranks lower than 88.54% of its peers in the Construction industry, earning it a moderate GuruFocus financial strength rating of 5 out of 10.
Profitability and Growth Prospects
Johnson Controls International PLC has shown consistent profitability, being in the black for 9 out of the past 10 years. With an operating margin of 7.52%, it outperforms 64.33% of its industry peers. The company's average annual revenue growth rate stands at 9.6%, showcasing its capability to expand effectively. Its three-year average EBITDA growth rate of 16.6% further underscores its growth potential.
Comparative Analysis of ROIC and WACC
An insightful way to gauge a company's profitability and value creation is by comparing its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). Johnson Controls International PLC's ROIC is currently at 7.12, which unfortunately falls below its WACC of 10.05, indicating that the company may not be creating value at an optimal rate.
Conclusion
Overall, Johnson Controls International PLC (JCI, Financial) appears to be fairly valued based on its current market performance and financial metrics. The company maintains a solid financial foundation and demonstrates promising growth prospects. For a deeper understanding of JCI's financial health and performance, potential investors are encouraged to review its 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.
