Unveiling Century Communities (CCS)'s Value: Is It Really Priced Right? A Comprehensive Guide
Century Communities Inc (NYSE:CCS) has recently experienced a daily loss of 7.77%, although it has managed to gain 4.6% over the last three months. With an Earnings Per Share (EPS) of 9.55, the question arises: is the stock modestly overvalued? This article will delve into the valuation analysis of Century Communities (NYSE:CCS), providing valuable insights for potential investors.
Company Introduction
Century Communities Inc is a construction company that primarily focuses on the residential market. With homebuilding segments spread across the West, Mountain, Texas, and Southeast regions, Century Communities also operates a financial services division offering mortgage, title, and insurance services to homebuyers. The company's stock is currently priced at $70.12, with a market cap of $2.20 billion, indicating a modest overvaluation according to the GF Value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price significantly deviates from the GF Value Line, it may be overvalued or undervalued, impacting its future returns.
For Century Communities, the stock appears to be modestly overvalued according to the GuruFocus Value calculation. This suggests that the long-term return of its stock is likely to be lower than its business growth.
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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 investing. Century Communities has a cash-to-debt ratio of 0.29, ranking worse than 69.81% of companies in the Homebuilding & Construction industry. This suggests a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Century Communities has been profitable 10 over the past 10 years, with a revenue of $3.90 billion and an Earnings Per Share (EPS) of $9.55 over the past twelve months. Its operating margin is 10.41%, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. Century Communities's 3-year average revenue growth rate is better than 79.41% of companies in the Homebuilding & Construction industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) can provide insights into its profitability. Century Communities's ROIC was 9.96, while its WACC was 7.89 over the past 12 months.
Conclusion
In summary, Century Communities appears to be modestly overvalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 91.58% of companies in the Homebuilding & Construction industry. For more details about Century Communities stock, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
