Unveiling Astec Industries (ASTE)'s Value: Is It Really Priced Right? A Comprehensive Guide
Despite a daily loss of 9.28%, Astec Industries Inc (NASDAQ:ASTE) has seen a 22.56% gain over the last three months. With an Earnings Per Share (EPS) of 1.1, the question arises: is this stock modestly undervalued? This article aims to provide a comprehensive valuation analysis of Astec Industries, offering insights into its intrinsic value. Let's delve in.
About Astec Industries
Astec Industries Inc designs and manufactures equipment and components primarily used in road construction and other development activities. Its products are integral to the entire process of building roads, from mining and crushing materials to creating the road surface. The company manufactures a line of plants, pavers, vehicles, and machines to mix and transform materials into construction components. It has two operating segments: infrastructure solutions and materials solutions. The majority of sales are derived from the United States.
At the current stock price of $49.55 per share and a market cap of $1.10 billion, our analysis suggests that Astec Industries stock appears to be modestly undervalued. The following is the income breakdown of Astec Industries:
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
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. Our analysis suggests that Astec Industries (NASDAQ:ASTE) appears to be modestly undervalued, indicating that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength of Astec Industries
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 purchasing shares. Astec Industries has a cash-to-debt ratio of 0.66, which ranks better than 52.24% of 201 companies in the Farm & Heavy Construction Machinery industry. The overall financial strength of Astec Industries is 8 out of 10, indicating strong financial health.
Profitability and Growth of Astec Industries
Investing in profitable companies carries less risk. Astec Industries has been profitable 8 years over the past 10 years. During the past 12 months, the company had revenues of $1.40 billion and Earnings Per Share (EPS) of $1.1. Its operating margin of 3.7% is worse than 68.66% of 201 companies in the Farm & Heavy Construction Machinery industry. Overall, GuruFocus ranks Astec Industries's profitability as fair.
Growth is a crucial factor in the valuation of a company. Astec Industries's 3-year average revenue growth rate is worse than 60.2% of 196 companies in the Farm & Heavy Construction Machinery industry. Its 3-year average EBITDA growth rate is -13.1%, ranking worse than 81.98% of 172 companies in the industry.
ROIC vs WACC of Astec Industries
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, Astec Industries's return on invested capital is 4.32, and its cost of capital is 13.71.
Conclusion
In conclusion, the stock of Astec Industries (NASDAQ:ASTE) appears to be modestly undervalued. The company's financial condition is strong and its profitability is fair, but its growth ranks worse than 81.98% of 172 companies in the Farm & Heavy Construction Machinery industry. To learn more about Astec Industries stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
