Unveiling Greenbrier (GBX)'s Value: Is It Really Priced Right? A Comprehensive Guide
Greenbrier Companies Inc (NYSE:GBX) experienced a daily loss of -7.42 %, yet it has shown a 3-month gain of 28.3%. With an Earnings Per Share (EPS) of 1.71, the question arises: is the stock modestly undervalued? This article will provide an in-depth analysis of Greenbrier's intrinsic value, encouraging readers to delve into the financial details of the company.
Introducing Greenbrier Companies Inc
Greenbrier Companies Inc is a leading designer, manufacturer, and marketer of railroad freight car equipment in North America and Europe. Additionally, it provides marine barges in North America and offers wheel services, railcar refurbishment, parts, leasing, and other services to the railroad industry. The majority of its revenue comes from its manufacturing segment and the United States.
With a current stock price of $38.55, it is crucial to compare this with the GF Value, an estimation of the stock's fair value. This comparison will pave the way for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on the summary page provides an overview of the fair value at which the stock should ideally be traded.
Greenbrier (NYSE:GBX) is estimated to be modestly undervalued based on GuruFocus' valuation method. If the stock price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and have higher future returns. At its current price of $ 38.55 per share, Greenbrier stock is estimated to be modestly undervalued.
Because Greenbrier is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Greenbrier's 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 deciding to buy shares. Greenbrier has a cash-to-debt ratio of 0.19, ranking worse than 72.09% of 935 companies in the Transportation industry. Based on this, GuruFocus ranks Greenbrier's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth of Greenbrier
Companies that have consistently been profitable over the long term offer less risk for investors. Greenbrier has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $3.90 billion and an Earnings Per Share (EPS) of $1.71. Its operating margin is 5.09%, which ranks worse than 61.88% of 934 companies in the Transportation industry. Overall, the profitability of Greenbrier is ranked 7 out of 10, indicating fair profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Greenbrier is -1.1%, which ranks worse than 64.5% of 907 companies in the Transportation industry. The 3-year average EBITDA growth is -7.2%, which ranks worse than 77.94% of 816 companies in the Transportation industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. 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 exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Greenbrier's ROIC was 4.97 while its WACC came in at 6.97.
Conclusion
In summary, the stock of Greenbrier (NYSE:GBX) is estimated to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 77.94% of 816 companies in the Transportation industry. To learn more about Greenbrier stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
