Unveiling Cia Paranaense De Energia Copel (ELP)'s Value: Is It Really Priced Right? A ...
With a daily loss of 2.8% and a 3-month gain of 7.29%, Cia Paranaense De Energia Copel (NYSE:ELP) has an Earnings Per Share (EPS) (EPS) of $0.14. This raises the question: is the stock modestly overvalued? To answer this, we delve into a valuation analysis. We invite you to read on for a comprehensive understanding of the company's worth.
Company Introduction
Cia Paranaense De Energia Copel is primarily involved in the production of power in the Brazilian state of Parana. It generates electricity through renewable energy sources such as hydroelectric, wind plants, and thermoelectric plants. The company's operating segments include power generation and transmission, gas, power distribution, power sale, and Holding and Services. Most of the company's revenue is derived from the sale of electricity. At its current price of $8.67 per share and a market cap of $25.90 billion, Cia Paranaense De Energia Copel stock shows signs of being modestly overvalued.
Summarizing GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
At its current price of $8.67 per share and the market cap of $25.90 billion, Cia Paranaense De Energia Copel stock shows every sign of being modestly overvalued. Because Cia Paranaense De Energia Copel is relatively overvalued, 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 poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Cia Paranaense De Energia Copel has a cash-to-debt ratio of 0.27, which is better than 51.13% of 485 companies in the Utilities - Regulated industry. GuruFocus ranks the overall financial strength of Cia Paranaense De Energia Copel at 5 out of 10, which indicates that the financial strength of Cia Paranaense De Energia Copel is fair.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Cia Paranaense De Energia Copel has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $4.30 billion and Earnings Per Share (EPS) of $0.14. Its operating margin of 12.96% is better than 52.17% of 506 companies in the Utilities - Regulated industry. Overall, GuruFocus ranks Cia Paranaense De Energia Copel's profitability as strong.
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Cia Paranaense De Energia Copel's 3-year average revenue growth rate is better than 65.64% of 486 companies in the Utilities - Regulated industry. Cia Paranaense De Energia Copel's 3-year average EBITDA growth rate is -15.8%, which ranks worse than 90.63% of 459 companies in the Utilities - Regulated industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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, Cia Paranaense De Energia Copel's return on invested capital is 5.5, and its cost of capital is 7.03.
Conclusion
Overall, Cia Paranaense De Energia Copel (NYSE:ELP) stock shows every sign of being modestly overvalued. The company's financial condition is fair and its profitability is strong. Its growth ranks worse than 90.63% of 459 companies in the Utilities - Regulated industry. To learn more about Cia Paranaense De Energia Copel stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
