On the trading day of May 29, 2024, XPEL Inc (XPEL, Financial) saw a notable daily gain of 7.65%, despite a three-month loss of 27.34%. With an Earnings Per Share (EPS) of 1.73, investors are prompted to consider whether XPEL (XPEL) is significantly undervalued. This analysis aims to delve deep into the valuation of XPEL, encouraging readers to explore the nuances of its financial and market position.
Company Introduction
XPEL Inc (XPEL, Financial) is a leading provider of protective films and coatings, including automotive paint protection film, surface protection film, and ceramic coatings. The company boasts a robust network of trained installers and proprietary DAP software, focusing on superior customer service and technical support. A significant portion of its revenue is generated in the United States. Currently, XPEL's stock price stands at $37.87, with a market cap of $1 billion. This positions the stock significantly below its GF Value of $88.6, suggesting that it might be undervalued.
Understanding the GF Value
The GF Value is a calculated metric indicating the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For XPEL, the GF Value suggests a fair value of $88.6 per share, which is considerably higher than its current trading price. This discrepancy indicates that XPEL is potentially undervalued, offering an attractive entry point for investors seeking long-term growth.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of permanent capital loss. XPEL's cash-to-debt ratio of 0.21, although lower than many of its peers, is supported by a strong financial strength rating of 8 out of 10 from GuruFocus. This suggests that the company is financially stable and capable of meeting its obligations.
Profitability and Growth Prospects
XPEL has consistently demonstrated profitability, with a remarkable operating margin of 15.3%, ranking better than 90.41% of its industry peers. The company's commitment to innovation and quality has also resulted in a robust average annual revenue growth of 35.6% over the past three years. Such performance metrics not only reflect the company's operational efficiency but also its potential for sustained growth.
Value Creation and Investment Considerations
A critical comparison between XPEL's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC) reveals that the company significantly creates value for its shareholders. The ROIC of 25.08% is substantially higher than the WACC of 11.43%, indicating efficient management and promising investor returns.
Conclusion
In conclusion, XPEL (XPEL, Financial) appears to be significantly undervalued based on its GF Value. The company's strong financial standing and impressive profitability underscore its potential for future growth and profitability. Investors seeking to capitalize on this potential are encouraged to consider XPEL as a viable addition to their investment portfolios. For a deeper dive into XPEL's financials, visit 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.
