Unveiling Belden (BDC)'s Value: Is It Really Priced Right? A Comprehensive Guide
On October 13, 2023, Belden Inc (NYSE:BDC) experienced a daily loss of 26.09%, contributing to a 3-month loss of 29.16%. Despite these figures, the company reported an Earnings Per Share (EPS) of 6.7. This raises the question: is Belden fairly valued? This article will delve into a thorough valuation analysis of Belden, providing valuable insights for potential investors.
Company Introduction
Belden Inc provides signal transmission products to distributors, end-users, installers, and original equipment manufacturers. The firm operates in two segments - Enterprise Solutions and Industrial Solutions. The Enterprise Solutions segment is a provider in network infrastructure solutions, as well as cabling and connectivity solutions for commercial audio/video and security applications. The Industrial Solutions segment is a provider of high-performance networking components and machine connectivity products.
With a current stock price of $70.41, Belden has a market cap of $3 billion. This article will compare this price with the company's GF Value, providing a comprehensive valuation analysis.
Understanding 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 returns and growth, and future business performance estimates. The GF Value Line represents the fair value at which the stock should 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. Currently, Belden (NYSE:BDC) appears to be fairly valued, with a GF Value of $77.7.
Because Belden is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Hence, it is crucial to review a company's financial strength before deciding whether to buy shares. Belden has a cash-to-debt ratio of 0.41, ranking worse than 77.27% of 2363 companies in the Hardware industry. Based on this, GuruFocus ranks Belden's financial strength as 6 out of 10, indicating a fair balance sheet.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk for investors. Belden has been profitable 8 over the past 10 years, with a revenue of $2.70 billion and an Earnings Per Share (EPS) of $6.7 over the past twelve months. Its operating margin is 13.07%, ranking better than 82.9% of 2444 companies in the Hardware industry. Overall, the profitability of Belden is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. Belden's 3-year average annual revenue growth is 5.2%, ranking better than 52.47% of 2325 companies in the Hardware industry. However, its 3-year average EBITDA growth rate is 7.2%, ranking worse than 56.65% of 1954 companies in the Hardware industry.
ROIC vs WACC
The profitability of a company can also be evaluated by comparing its return on invested capital (ROIC) and the weighted cost of capital (WACC). 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. For the past 12 months, Belden's ROIC is 15.06, and its WACC is 9.73.
Conclusion
In summary, Belden (NYSE:BDC) appears to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 56.65% of 1954 companies in the Hardware industry. To learn more about Belden 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.
