LCI Industries (LCII): An In-Depth Analysis of Its Market Value
LCI Industries Inc (NYSE:LCII) recently experienced a daily loss of -7.09%, and a 3-month loss of -10.44%. Despite these figures, the company's Earnings Per Share (EPS) stands at 3.32. But the question that begs an answer is: Is the stock fairly valued? This article provides an in-depth valuation analysis of LCI Industries (NYSE:LCII), encouraging readers to delve deeper into the company's financial performance and prospects.
Introduction to LCI Industries
LCI Industries Inc supplies components for original equipment manufacturers of recreational vehicles and adjacent industries, both domestically and internationally. The company's stock price currently stands at $107.23, while the GF Value, an estimation of fair value, is $116.81. This comparison between the stock price and the GF Value sets the stage for a deeper exploration of the company's value, ingeniously integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our proprietary method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
The stock of LCI Industries (NYSE:LCII) gives every indication of being fairly valued based on GuruFocus' valuation method. GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $ 107.23 per share, LCI Industries stock gives every indication of being fairly valued.
Because LCI Industries is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Assessing Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. LCI Industries has a cash-to-debt ratio of 0.02, which is worse than 95.84% of 1226 companies in the Vehicles & Parts industry. GuruFocus ranks the overall financial strength of LCI Industries at 5 out of 10, which indicates that the financial strength of LCI Industries is fair.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. LCI Industries has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4 billion and Earnings Per Share (EPS) of $3.32. Its operating margin is 3.48%, which ranks worse than 60.54% of 1262 companies in the Vehicles & Parts industry. Overall, the profitability of LCI Industries is ranked 9 out of 10, which indicates strong profitability.
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. LCI Industries's 3-year average revenue growth rate is better than 91.11% of 1203 companies in the Vehicles & Parts industry. LCI Industries's 3-year average EBITDA growth rate is 34.5%, which ranks better than 84.57% of 1076 companies in the Vehicles & Parts industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). 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. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, LCI Industries's ROIC is 3.82 while its WACC came in at 8.37.
Conclusion
In summary, the stock of LCI Industries (NYSE:LCII) gives every indication of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 84.57% of 1076 companies in the Vehicles & Parts industry. To learn more about LCI Industries stock, you can check out 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.
This article first appeared on GuruFocus.
