Inter Parfums (IPAR): A Comprehensive Analysis of Its Market Value
Inter Parfums Inc (NASDAQ:IPAR) has seen a daily loss of 3.64% and a 3-month loss of 1.52%. Despite this, the company reported an Earnings Per Share (EPS) of 4.59. This raises the question: Is the stock fairly valued? In this article, we will conduct a valuation analysis to answer this question. Read on to get a detailed understanding of Inter Parfums' intrinsic value.
Company Introduction
Inter Parfums Inc operates in the fragrance business, manufacturing, marketing, and distributing fragrances and related products. The company sells its products under established brand names such as JIMMY CHOO, bebe, Paul Smith, Abercrombie and Fitch, and COACH. Inter Parfums operates in two segments, namely European based operations, and United-States operations, selling its products to department stores, perfumeries, specialty stores, and domestic and international wholesalers and distributors.
As of September 26, 2023, Inter Parfums' stock price stood at $130.81. The company has a market cap of $4.20 billion and reported sales of $1.20 billion. Comparing this with the GF Value, an estimation of the fair value, we get a deeper insight into the company's value.
Understanding GF Value
The GF Value is a measure of the current intrinsic value of a stock, calculated based on historical multiples, GuruFocus adjustment factor, and future estimates of business performance. The GF Value Line provides an overview of the fair value at which the stock should be traded.
For Inter Parfums, the GF Value indicates that the stock is fairly valued. This is based on historical multiples, an internal adjustment based on past business growth, and analyst estimates of future business performance. If the stock's price is significantly above the GF Value Line, it may be overvalued, leading to poor future returns. Conversely, if it's significantly below the GF Value Line, it may be undervalued, promising high future returns.
With its current price of $130.81 per share, Inter Parfums, with a market cap of $4.20 billion, appears to be fairly valued. As such, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's essential to review a company's financial strength before purchasing shares. The cash-to-debt ratio and interest coverage are key indicators of financial strength. Inter Parfums has a cash-to-debt ratio of 0.92, which ranks better than 61.95% of 1795 companies in the Consumer Packaged Goods industry. The overall financial strength of Inter Parfums is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies carries less risk. Companies with high profit margins typically offer better performance potential than those with low profit margins. Inter Parfums has been profitable for 10 years over the past 10 years. During the past 12 months, the company had revenues of $1.20 billion and Earnings Per Share (EPS) of $4.59. Its operating margin of 19.86% is better than 92.29% of 1841 companies in the Consumer Packaged Goods industry. Overall, GuruFocus ranks Inter Parfums's profitability as strong.
Growth is a crucial factor in the valuation of a company. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Inter Parfums's 3-year average revenue growth rate is better than 73.72% of 1716 companies in the Consumer Packaged Goods industry. Its 3-year average EBITDA growth rate is 23.5%, ranking better than 74.08% of 1524 companies in the same industry.
ROIC vs WACC
Comparing the return on invested capital to the weighted average cost of capital is another way to determine a company's profitability. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (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, Inter Parfums's return on invested capital is 24.45, and its cost of capital is 12.71.
Conclusion
Overall, Inter Parfums (NASDAQ:IPAR) stock appears to be fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 74.08% of 1524 companies in the Consumer Packaged Goods industry. For more detailed information about Inter Parfums stock, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
