Unveiling The Chefs' Warehouse (CHEF)'s Value: Is It Really Priced Right? A Comprehensive Guide
The Chefs' Warehouse Inc (NASDAQ:CHEF), despite its recent loss of -4.88% and a 3-month decrease of -19.53%, still stands strong with an Earnings Per Share (EPS) of 0.53. The question arises, is the stock significantly undervalued? This article presents a detailed valuation analysis of CHEF to answer this question. We invite you to continue reading for an in-depth understanding of the company's value.
Company Introduction
The Chefs' Warehouse Inc is a specialty food distributor across major metropolitan areas in the United States and Canada. The company offers a vast portfolio of imported and local specialty food products, including cheese, cooking oils, chocolates, dried food, baking products, meats, and more. The Chefs' Warehouse primarily caters to restaurants, clubs, hotels, caterers, schools, bakeries, casinos, and specialty food stores. With a stock price of $26.49 and a GF Value of $42.34, the company appears to be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that offers an estimation of a stock's fair value. It considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the ideal fair trading value of the stock. 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.
According to GuruFocus Value calculation, The Chefs' Warehouse stock is significantly undervalued. With a current price of $26.49 per share and a market cap of $1.10 billion, the stock is estimated to deliver a higher long-term return due to its undervaluation.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, it's crucial to review a company's financial strength before investing. The Chefs' Warehouse's cash-to-debt ratio stands at 0.07, which is lower than 84.69% of 307 companies in the Retail - Defensive industry. Its overall financial strength is ranked at 5 out of 10 by GuruFocus, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. The Chefs' Warehouse has been profitable 8 out of the past 10 years, with a revenue of $3.10 billion and an Earnings Per Share (EPS) of $0.53 over the past twelve months. Its operating margin is 2.92%, ranking lower than 54.07% of 307 companies in the Retail - Defensive industry. Overall, GuruFocus ranks The Chefs' Warehouse's profitability at 6 out of 10, indicating fair profitability.
The company's growth is also a crucial factor in valuation. The Chefs' Warehouse's 3-year average annual revenue growth rate is 8.4%, which ranks better than 63.45% of 290 companies in the Retail - Defensive industry. However, its 3-year average EBITDA growth rate is 7.9%, ranking lower than 55.21% of 259 companies in the same industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, The Chefs' Warehouse's ROIC was 5.25, while its WACC came in at 9.75.
Conclusion
In summary, The Chefs' Warehouse stock is estimated to be significantly undervalued. The company's financial condition and profitability are fair, although its growth ranks lower than 55.21% of 259 companies in the Retail - Defensive industry. To learn more about The Chefs' Warehouse stock, you can check out its 30-Year Financials here.
To find out high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
