Unveiling Sociedad Quimica Y Minera De Chile SA (SQM)'s Value: Is It Really Priced Right? A ...
Sociedad Quimica Y Minera De Chile SA (NYSE:SQM) saw a daily gain of 5.84%, despite a 3-month loss of 29%. With an Earnings Per Share (EPS) of 12.54, the question arises: is the stock significantly undervalued? This article aims to provide a comprehensive valuation analysis of SQM, offering insights into its financial strength, profitability, and growth. We invite you to read on to understand the intrinsic value of this stock.
Company Introduction
Sociedad Quimica Y Minera De Chile SA is a leading Chilean commodities producer with significant operations in lithium, specialty and standard potassium fertilizers, iodine, and solar salts. The company's high-quality caliche ore and salt brine deposits facilitate the extraction of these materials. SQM is also developing a hard rock lithium project in Australia. With a current market cap of $16 billion, the stock's price stands at $56.14 per share, suggesting a significant undervaluation when compared to the GF Value of $228.72.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. 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.
Given its current price of $56.14 per share, Sociedad Quimica Y Minera De Chile SA appears to be significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it is crucial to review a company's financial strength before deciding to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Sociedad Quimica Y Minera De Chile SA has a cash-to-debt ratio of 0.76, which ranks better than 50.86% of 1504 companies in the Chemicals industry. GuruFocus ranks Sociedad Quimica Y Minera De Chile SA's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Sociedad Quimica Y Minera De Chile SA has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $10.40 billion and Earnings Per Share (EPS) of $12.54. Its operating margin is 48.76%, which ranks better than 99.15% of 1521 companies in the Chemicals industry. GuruFocus ranks the profitability of Sociedad Quimica Y Minera De Chile SA at 9 out of 10, indicating strong 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 Sociedad Quimica Y Minera De Chile SA is 81.3%, which ranks better than 98.27% of 1449 companies in the Chemicals industry. The 3-year average EBITDA growth is 135%, which ranks better than 98.73% of 1338 companies in the Chemicals industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted 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. For the past 12 months, Sociedad Quimica Y Minera De Chile SA's return on invested capital is 59.04, and its cost of capital is 12.77.
Conclusion
Overall, Sociedad Quimica Y Minera De Chile SA (NYSE:SQM) stock appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 98.73% of 1338 companies in the Chemicals industry. For a detailed understanding of Sociedad Quimica Y Minera De Chile SA stock, you can check out its 30-Year Financials here.
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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.
