Revealing Methanex (MEOH)'s True Worth: A Comprehensive Guide to Its Market Value
The stock of Methanex Corp (NASDAQ:MEOH) experienced a daily loss of 6.75% and a 3-month loss of 6.79%. Despite these figures, the company boasts an Earnings Per Share (EPS) (EPS) of 3.06. The question arises: is Methanex (NASDAQ:MEOH) modestly undervalued? This article provides a detailed analysis of the company's valuation, encouraging readers to delve into the subsequent sections.
Company Overview
Methanex Corp is a leading manufacturer and seller of methanol, a key feedstock used in the production of adhesives, foams, solvents, and windshield washer fluids. The firm also caters to the oil refining industry, blending methanol with gasoline to produce a high-octane fuel or as a component of biodiesel. With a robust global supply chain that includes port terminals, tankers, barges, rail cars, trucks, and pipelines, Methanex generates the most revenue from China.
Despite a current stock price of $40.92, the GF Value estimates the fair value of Methanex at $46.5, suggesting it is modestly undervalued. This valuation will be further explored in the analysis below.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor derived from past performance and growth, and future business performance estimates. The GF Value Line provides a snapshot of the stock's fair trading value.
With Methanex (NASDAQ:MEOH) currently trading at $40.92 per share, the stock is believed to be modestly undervalued according to the GF Value. This suggests that the long-term return of Methanex's stock is likely to be higher than its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Methanex's cash-to-debt ratio of 0.22 ranks worse than 76.99% of 1504 companies in the Chemicals industry. Based on this, GuruFocus ranks Methanex's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those demonstrating consistent profitability over the long term, poses less risk. Methanex has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $4 billion and an Earnings Per Share (EPS) of $3.06. Its operating margin is 11.24%, ranking better than 70.41% of 1521 companies in the Chemicals industry. GuruFocus ranks Methanex's profitability at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. Methanex's 3-year average revenue growth rate is better than 61.9% of 1449 companies in the Chemicals industry. Its 3-year average EBITDA growth rate is 26.7%, ranking better than 75.65% of 1339 companies in the Chemicals industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method to determine its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. 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. Methanex's ROIC is 7.56, and its WACC is 7.78.
Conclusion
Based on the analysis, Methanex (NASDAQ:MEOH) stock is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 75.65% of 1339 companies in the Chemicals industry. To learn more about Methanex stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
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.
