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) experienced a daily gain of 5.09% and a 3-month loss of -17.98%. Its Earnings Per Share (EPS) stands at 12.54. The question arises: Is the stock significantly undervalued? This article aims to answer this question by conducting a thorough valuation analysis. Read on to discover more about Sociedad Quimica Y Minera De Chile SA's intrinsic value.
Company Introduction
Sociedad Quimica y Minera de Chile is a Chilean commodities producer with significant operations in lithium, specialty and standard potassium fertilizers, iodine, and solar salts. The company extracts these materials through its high-quality caliche ore and salt brine deposits. SQM is also developing a hard rock lithium project in Australia. The stock price currently stands at $57.63, while the GF Value, an estimation of fair value, is at $231.12. This suggests that the stock could be significantly undervalued.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. This value is based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future estimates of business performance. If the stock price is significantly above the GF Value Line, it is 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.
As per GuruFocus Value calculation, the stock of Sociedad Quimica Y Minera De Chile SA (NYSE:SQM) is believed to be significantly undervalued. With its current price of $57.63 per share and the market cap of $16.50 billion, the future return of its stock is likely to be much higher than its business growth due to its significant undervaluation.
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Financial Strength
Checking the financial strength of a company before buying its stock is crucial. Companies with poor financial strength have a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can provide a great understanding of a company's financial strength. Sociedad Quimica Y Minera De Chile SA has a cash-to-debt ratio of 0.76, which is better than 51% of 1506 companies in the Chemicals industry. The overall financial strength of Sociedad Quimica Y Minera De Chile SA is 8 out of 10, indicating strong financial health.
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. 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 1526 companies in the Chemicals industry. Overall, the profitability of Sociedad Quimica Y Minera De Chile SA is ranked 9 out of 10, indicating 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 Sociedad Quimica Y Minera De Chile SA is 81.3%, which ranks better than 98.21% of 1449 companies in the Chemicals industry. The 3-year average EBITDA growth rate is 135%, which ranks better than 98.73% of 1340 companies in the Chemicals industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Sociedad Quimica Y Minera De Chile SA's ROIC is 59.04 while its WACC came in at 12.63.
Conclusion
In summary, the stock of Sociedad Quimica Y Minera De Chile SA (NYSE:SQM) is believed to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 98.73% of 1340 companies in the Chemicals industry. To learn more about Sociedad Quimica Y Minera De Chile SA stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
