Is Retractable Technologies (RVP) Modestly Undervalued? A Comprehensive Analysis
Retractable Technologies (RVP) has recently experienced a daily gain of 14.41%, and over the last three months, it has seen a gain of 4.96%. However, it also reported a Loss Per Share of 0.07. This raises the question: Is the stock modestly undervalued? In this article, we will explore the valuation analysis of Retractable Technologies, providing you with valuable insights into the stock's intrinsic value.
Company Overview
Retractable Technologies Inc designs, develops, manufactures, and markets safety syringes and other safety medical products for the healthcare profession. Its products range from the VanishPoint 0.5mL insulin syringe to the EasyPoint needle. The company also sells VanishPoint autodisable syringes in the international market along with its other products. Despite its diverse product portfolio, the company has a market cap of $38 million, and its stock price stands at $1.27 per share. This is in contrast to its GF Value, an estimate of its fair value, which is $1.68.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to GuruFocus' valuation method, Retractable Technologies (RVP) is estimated to be modestly undervalued. This suggests that 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. Therefore, it's crucial to review a company's financial strength before deciding to purchase shares. Factors such as the cash-to-debt ratio and interest coverage can provide valuable insights into its financial strength. Retractable Technologies has a cash-to-debt ratio of 26.13, which ranks better than 77.31% of 833 companies in the Medical Devices & Instruments industry. The overall financial strength of Retractable Technologies is 7 out of 10, indicating fair financial strength.
Profitability and Growth
Consistent profitability over the long term usually indicates a safer investment compared to a company with lower profit margins. Retractable Technologies has been profitable for 5 out of the past 10 years. In the past twelve months, the company had a revenue of $54.70 million and a Loss Per Share of $0.07. Its operating margin is -19.23%, which ranks worse than 61.53% of 824 companies in the Medical Devices & Instruments industry. The overall profitability of Retractable Technologies is ranked 5 out of 10, indicating fair profitability.
Growth is one of the most important factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Retractable Technologies is 31%, which ranks better than 86.17% of 723 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth is 33%, which ranks better than 78.24% of 726 companies in the Medical Devices & Instruments industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining its profitability. 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, Retractable Technologies's ROIC is -2.05, and its cost of capital is 12.79.
Conclusion
In conclusion, the stock of Retractable Technologies (RVP) is estimated to be modestly undervalued. The company's financial condition is fair, and its profitability is also fair. Its growth ranks better than 78.24% of 726 companies in the Medical Devices & Instruments industry. To learn more about Retractable Technologies stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
