Unveiling Grupo Simec SAB de CV (SIM)'s Value: Is It Really Priced Right? A Comprehensive Guide
Grupo Simec SAB de CV (SIM) has seen a daily loss of -6.52% and a 3-month loss of -7.86%. With an Earnings Per Share (EPS) of 1.16, the question arises: is the stock fairly valued? This article delves into the valuation analysis of Grupo Simec SAB de CV, providing readers with a comprehensive understanding of the company's financial status and future prospects. Let's explore.
Company Introduction
Grupo Simec SAB de CV is a diversified manufacturer, processor, and distributor of special bar quality (SBQ) steel, and structural steel products. The company operates in major markets like the United States, Brazil, and Mexico. Its SBQ products are used across a broad range of engineered end-user applications, while its structural steel products are mainly used in the non-residential construction market. Comparing the stock price of $32.25 to the GF Value of $30.48, the company appears to be fairly valued.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at. 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.
Grupo Simec SAB de CV stock is estimated to be fairly valued at its current price of $32.25 per share. This estimation is based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. Because Grupo Simec SAB de CV is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. Grupo Simec SAB de CV has a cash-to-debt ratio of 4034.96, which ranks better than 92.84% of 587 companies in the Steel industry. The overall financial strength of Grupo Simec SAB de CV is 10 out of 10, which indicates that the financial strength of Grupo Simec SAB de CV is strong.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. Grupo Simec SAB de CV has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $2.50 billion and Earnings Per Share (EPS) of $1.16. Its operating margin is 20.36%, which ranks better than 93.03% of 603 companies in the Steel industry. Overall, the profitability of Grupo Simec SAB de CV is ranked 8 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Grupo Simec SAB de CV is 16.8%, which ranks better than 70.31% of 586 companies in the Steel industry. The 3-year average EBITDA growth rate is 64.2%, which ranks better than 87.23% of 509 companies in the Steel industry.
ROIC vs 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Grupo Simec SAB de CV's return on invested capital is 14.54, and its cost of capital is 10.52.
Conclusion
Overall, Grupo Simec SAB de CV (SIM) stock is estimated to be fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 87.23% of 509 companies in the Steel industry. To learn more about Grupo Simec SAB de CV stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
