With a daily loss of 6.7% and a 3-month gain of 11.63%, Celsius Holdings Inc (NASDAQ:CELH) has been making waves in the financial market. However, with a Loss Per Share of $1.91, the question arises: Is the stock modestly undervalued? This article aims to answer this question by delving into a comprehensive valuation analysis of Celsius Holdings (NASDAQ:CELH). So, let's dive in!
Celsius Holdings Inc engages in the development, marketing, sale, and distribution of functional calorie-burning beverages. It offers flavors including cola, orange, wild berry, and lemon iced tea and non-carbonated flavors such as Raspberry Acai Green Tea and Peach Mango Green Tea under the Celsius brand name. The company distributes its products through various retail segments, including supermarkets, convenience stores, drug stores, nutritional stores, mass merchants, health clubs, spas, gyms, military, and e-commerce websites.
Currently, Celsius Holdings (NASDAQ:CELH) trades at $162.34 per share, with a market cap of $12.50 billion. But how does this compare with its intrinsic value? Let's explore the GF Value, an exclusive measure that estimates the fair value of the stock.
Understanding GF Value
The GF Value is a proprietary measure that estimates the current intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. This value is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) at which the stock has been traded.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
According to our calculations, Celsius Holdings stock appears to be modestly undervalued. With a GF Value of $219.87, the stock's long-term return is likely to be higher than its business growth.
Investing in companies with poor financial strength can lead to a high risk of permanent capital loss. To avoid this, it's essential to review a company's financial strength before deciding to purchase shares. Factors like the cash-to-debt ratio and interest coverage can provide valuable insights into its financial strength. Celsius Holdings boasts a cash-to-debt ratio of 703.57, ranking better than 92.31% of 104 companies in the Beverages - Non-Alcoholic industry. Overall, the financial strength of Celsius Holdings is strong, scoring 8 out of 10.
Profitability and Growth
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Celsius Holdings has been profitable 3 times over the past 10 years. Over the past twelve months, the company had a revenue of $952 million and a Loss Per Share of $1.91. Its operating margin is -7.42%, ranking worse than 79.25% of 106 companies in the Beverages - Non-Alcoholic industry. Overall, GuruFocus ranks the profitability of Celsius Holdings at 4 out of 10, indicating poor profitability.
Growth is a critical factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Celsius Holdings is 94.7%, ranking better than 97.89% of 95 companies in the Beverages - Non-Alcoholic industry. However, the 3-year average EBITDA growth rate is 0%, ranking worse than all companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way to determine 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, Celsius Holdings's ROIC is -31.4, and its cost of capital is 14.18.
In conclusion, the stock of Celsius Holdings (NASDAQ:CELH) appears to be modestly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks worse than all companies in the Beverages - Non-Alcoholic industry. To learn more about Celsius Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.