Unveiling Circor International (CIR)'s Value: Is It Really Priced Right? A Comprehensive Guide
With a daily gain of 5.15%, a 3-month loss of 0.04%, and an Earnings Per Share (EPS) of $1.37, Circor International Inc (NYSE:CIR) has caught the attention of many investors. The question now is, is the stock significantly overvalued? This article aims to provide an in-depth valuation analysis of Circor International, encouraging investors to delve into the following analysis for a comprehensive understanding of the company's value.
Company Introduction
Circor International Inc. designs, manufactures, and markets differentiated technology products and sub-systems. It operates in two business segments: aerospace & defense and industrial. Circor primarily delivers flow control products and services to original equipment manufacturers (OEMs) and engineering, procurement, and construction (EPC) companies worldwide. Its products include positive displacement pumps, motors, specialty centrifugal pumps, metering pumps, automatic recirculating valves, control & actuators valves, and high-pressure pneumatic systems. Most of the company sales are generated in the United States, with valves and pumps under its industrial segment contributing the most to the company's profit.
Understanding 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.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
As of October 17, 2023, the stock of Circor International (NYSE:CIR) gives every indication of being significantly overvalued based on GuruFocus' valuation method. GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. At its current price of $55.99 per share, Circor International has a market cap of $1.10 billion, indicating that the stock is significantly overvalued.
Because Circor International is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Circor International has a cash-to-debt ratio of 0.11, which is worse than 91.22% of 2848 companies in the Industrial Products industry. The overall financial strength of Circor International is 4 out of 10, which indicates that the financial strength of Circor International is poor.
Profitability and Growth
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Circor International has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $821.80 million and Earnings Per Share (EPS) of $1.37. Its operating margin is 9.07%, which ranks better than 60.91% of 2896 companies in the Industrial Products industry. Overall, the profitability of Circor International is ranked 6 out of 10, which indicates fair profitability.
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. Circor International's 3-year average revenue growth rate is worse than 85.06% of 2737 companies in the Industrial Products industry. Circor International's 3-year average EBITDA growth rate is 4.5%, which ranks worse than 59.87% of 2427 companies in the Industrial Products industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Circor International's ROIC was 6.66, while its WACC came in at 13.84.
Conclusion
In conclusion, the stock of Circor International (NYSE:CIR) gives every indication of being significantly overvalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 59.87% of 2427 companies in the Industrial Products industry. To learn more about Circor International stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
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.
