Acushnet Holdings (GOLF): A Hidden Gem in the Golf Industry?
With a daily loss of -2.22% and a 3-month loss of -2.98%, Acushnet Holdings Corp (NYSE:GOLF) has an Earnings Per Share (EPS) of 3.17. The question that arises is whether the stock is modestly undervalued. This article will delve into a valuation analysis to answer this question. Read on to uncover the intrinsic value of Acushnet Holdings (NYSE:GOLF).
Company Introduction
Acushnet Holdings Corp is a key player in the golf industry, specializing in the design, development, manufacture, and distribution of golf products. Its product range includes golf balls, golf shoes, golf clubs, wedges, putters, golf gloves, golf gear, and golf wear. The company generates significant revenue from the sales of golf balls and golf gloves.
Acushnet Holdings operates in various regions, including the United States, EMEA, Japan, and Korea, with the majority of its revenue generated from operations in the United States. The company's stock price currently stands at $51.87, while its GF Value, an estimation of fair value, is $58.39. This comparison suggests that the stock might be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above or below the GF Value Line, it indicates that the stock may be overvalued or undervalued, respectively.
According to the GF Value, Acushnet Holdings Corp (NYSE:GOLF) appears to be modestly undervalued. As such, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it is crucial to review a company's financial strength before purchasing shares. The cash-to-debt ratio and interest coverage are good indicators of financial strength. Acushnet Holdings has a cash-to-debt ratio of 0.09, which ranks worse than 80.56% of 828 companies in the Travel & Leisure industry. The overall financial strength of Acushnet Holdings is 6 out of 10, indicating that its financial strength is fair.
Profitability and Growth
Investing in profitable companies carries less risk. Companies that have consistently demonstrated profitability over the long term, particularly those with high profit margins, offer better performance potential. Acushnet Holdings has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $2.40 billion and an Earnings Per Share (EPS) of $3.17. Its operating margin of 13.4% is better than 67.11% of 830 companies in the Travel & Leisure industry. Overall, GuruFocus ranks Acushnet Holdings's profitability as strong.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Acushnet Holdings is 12.1%, which ranks better than 80.03% of 771 companies in the Travel & Leisure industry. The 3-year average EBITDA growth rate is 13.1%, which ranks better than 63.5% of 611 companies in the Travel & Leisure industry.
ROIC vs WACC
Another method of determining a company's profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). The ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Acushnet Holdings's ROIC is 14.13, and its WACC is 8.85.
Conclusion
In conclusion, the stock of Acushnet Holdings (NYSE:GOLF) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 63.5% of 611 companies in the Travel & Leisure industry. To learn more about Acushnet Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
