Unveiling Lindsay (LNN)'s Intrinsic Value: Is It Priced Right? A Comprehensive Guide
Despite a daily loss of 6.13% and a 3-month loss of 4.5%, Lindsay Corp (NYSE:LNN) has an Earnings Per Share (EPS) (EPS) of 6.43. This raises the question: Is the stock modestly undervalued? This article seeks to provide a comprehensive analysis of Lindsay's valuation. Read on to gain insights into the company's financial health, profitability, and growth prospects.
Company Overview
Lindsay Corp is a leading provider of proprietary water management and road infrastructure products and services. The company operates two significant segments: Irrigation and Infrastructure. Its Irrigation segment, which generates the majority of the company's revenue, manufactures and markets various innovative technology solutions such as GPS positioning and guidance, variable rate irrigation, wireless irrigation management, M2M communication technology, and smartphone applications. Lindsay Corp's primary market is the United States.
At the current stock price of $120 per share, Lindsay Corp (NYSE:LNN) has a market cap of $1.30 billion, making it a key player in its industry. However, the GuruFocus Value, our proprietary measure of the stock's intrinsic value, is $150.82, suggesting that the stock may be modestly undervalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
Our analysis indicates that Lindsay (NYSE:LNN) stock appears to be modestly undervalued based on the GF Value calculation. If a stock's price is significantly above the GF Value Line, it is considered 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. Given that Lindsay is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Assessing Lindsay's Financial Strength
Before investing in a company's stock, it's crucial to check its financial strength. Investing in companies with poor financial strength can lead to a higher risk of permanent loss. Lindsay's cash-to-debt ratio of 1.06 is better than 61.54% of 208 companies in the Farm & Heavy Construction Machinery industry, indicating strong financial health.
Evaluating Lindsay's Profitability and Growth
Investing in profitable companies carries less risk. Lindsay has been profitable for 10 years over the past 10 years, demonstrating consistent profitability. Moreover, Lindsay's operating margin of 15.29% is better than 88.46% of 208 companies in the Farm & Heavy Construction Machinery industry, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The 3-year average annual revenue growth rate of Lindsay is 19.4%, which ranks better than 83.74% of 203 companies in the Farm & Heavy Construction Machinery industry. The 3-year average EBITDA growth rate is 74%, which ranks better than 93.89% of 180 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. Lindsay's ROIC was 14.4 over the past 12 months, while its WACC came in at 9.19. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders.
Conclusion
Overall, Lindsay (NYSE:LNN) stock appears to be modestly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 93.89% of 180 companies in the Farm & Heavy Construction Machinery industry. To learn more about Lindsay stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
