Unveiling SP Plus (SP)'s Value: Is It Really Priced Right? A Comprehensive Guide
SP Plus Corp (NASDAQ:SP) has experienced a significant daily gain of 47.36% and a 3-month gain of 31.61%. The company's Earnings Per Share (EPS) (EPS) stands at 1.96. However, is the stock significantly overvalued? This article aims to answer this question by providing a comprehensive valuation analysis of SP Plus. Let's dive in to understand more about the company's operations, financial performance, and intrinsic value.
A Snapshot of SP Plus Corp
SP Plus Corp provides parking management, ground transportation, and other ancillary services to commercial, institutional, and municipal clients in urban markets and airports across the United States, Canada, and Puerto Rico. The company's services include on-site parking management, ground transportation services, airport and municipal shuttle operations, valet services, taxi and livery dispatch services, and municipal meter revenue collection and enforcement services. With its primary revenue generated from the Commercial segment, the company has a market cap of $1 billion and sales of $1.70 billion.
Understanding the GF Value
The GF Value is a unique measure that provides an estimation of a stock's intrinsic value. It is calculated considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
The stock of SP Plus (NASDAQ:SP) appears to be significantly overvalued based on GuruFocus' valuation method. The GF Value estimates the stock's fair value at $33.54, which is significantly lower than its current price of $52.18 per share. Therefore, the long-term return of SP Plus stock is likely to be much lower than its future business growth.
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Assessing the Financial Strength
Before investing in a company, it's crucial to check its financial strength. Investing in companies with poor financial strength can lead to a higher risk of permanent loss. SP Plus has a cash-to-debt ratio of 0.04, which is worse than 92.4% of 1039 companies in the Business Services industry. The overall financial strength of SP Plus is 5 out of 10, indicating that the financial strength of SP Plus is fair.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. SP Plus has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $1.70 billion and Earnings Per Share (EPS) of $1.96. Its operating margin is 4.84%, which ranks worse than 56.46% of 1052 companies in the Business Services industry. Overall, the profitability of SP Plus is ranked 6 out of 10, indicating fair profitability.
Growth is one of the most important factors in the valuation of a company. SP Plus's 3-year average revenue growth rate is worse than 64.37% of 974 companies in the Business Services industry. SP Plus's 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 845 companies in the Business Services 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, SP Plus's return on invested capital is 6.04, and its cost of capital is 8.1.
Conclusion
Overall, SP Plus (NASDAQ:SP) stock appears to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 0% of 845 companies in the Business Services industry. To learn more about SP Plus stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
