SiteOne Landscape Supply (SITE): A Closer Look at its Modest Undervaluation
SiteOne Landscape Supply Inc (NYSE:SITE) has recently seen a daily gain of 3.72%, and a 3-month gain of 1.09%. With an Earnings Per Share (EPS) (EPS) of 4.19, this analysis aims to answer the question: is the stock modestly undervalued? This article will delve into a comprehensive valuation analysis of SiteOne Landscape Supply.
A Snapshot of SiteOne Landscape Supply Inc (NYSE:SITE)
SiteOne Landscape Supply is a leading supplier of tools and equipment serving a wide array of businesses in the United States and Canada. Its product portfolio includes wholesale irrigation, outdoor lighting, nursery, landscape supplies, grass seeds, fertilizers, turf protection products, turf care equipment, and golf course accessories. The company's stock is currently priced at $163.45, while its fair value according to GuruFocus (GF Value) is estimated to be $198.68.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. 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.
Considering these factors, SiteOne Landscape Supply (NYSE:SITE) appears 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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SiteOne Landscape Supply's Financial Strength
Investing in companies with poor financial strength can pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. SiteOne Landscape Supply has a cash-to-debt ratio of 0.08, which ranks worse than 81.63% of 147 companies in the Industrial Distribution industry. The overall financial strength of SiteOne Landscape Supply is 7 out of 10, indicating fair financial strength.
Profitability and Growth of SiteOne Landscape Supply
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. SiteOne Landscape Supply has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $4.20 billion and an Earnings Per Share (EPS) of $4.19. Its operating margin is 6.52%, which ranks better than 54.67% of 150 companies in the Industrial Distribution industry. Overall, GuruFocus ranks the profitability of SiteOne Landscape Supply at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth of SiteOne Landscape Supply is 16.7%, which ranks better than 79.86% of 144 companies in the Industrial Distribution industry. The 3-year average EBITDA growth rate is 30.3%, which ranks better than 78.29% of 129 companies in the Industrial Distribution industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate a company's 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. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, SiteOne Landscape Supply's ROIC was 9.69, while its WACC came in at 13.78.
Conclusion
In conclusion, the stock of SiteOne Landscape Supply (NYSE:SITE) appears to be modestly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 78.29% of 129 companies in the Industrial Distribution industry. For more information about SiteOne Landscape Supply stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
