Unveiling Tronox Holdings PLC (TROX)'s Value: Is It Really Priced Right? A Comprehensive Guide
The stock of Tronox Holdings PLC (NYSE:TROX) has experienced a daily loss of 6.42% and a three-month loss of 5.32%, with a reported Loss Per Share of 0.89. Amidst these fluctuations, an essential question arises: is the stock modestly undervalued? This article provides a comprehensive valuation analysis of Tronox Holdings PLC (NYSE:TROX). We encourage readers to delve into the following sections for an informed investment decision.
An Overview of Tronox Holdings PLC
Tronox Holdings PLC is a vertically integrated manufacturer of TiO2 pigment. With operations in Australia, South Africa, the United States, the Netherlands, and Western Australia, the company produces feedstock materials for TiO2 pigments and high-purity titanium chemicals. With a current price of $11.81 per share and a market cap of $1.90 billion, the company's stock appears to be modestly undervalued when compared to its GF Value of $14.76.
Understanding the GF Value
The GF Value is a unique valuation approach that estimates a stock's intrinsic value based on historical multiples, an internal 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. According to our analysis, Tronox Holdings PLC (NYSE:TROX) appears to be modestly undervalued. This implies that the long-term return of its stock is likely to be higher than its business growth.
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Evaluating Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Hence, it's crucial to review a company's financial strength before investing. Tronox Holdings PLC's cash-to-debt ratio of 0.06, which is worse than 92.21% of companies in the Chemicals industry, indicates poor financial strength.
Profitability and Growth
Companies that have consistently been profitable over the long term offer less risk to investors. Tronox Holdings PLC has been profitable for three out of the past ten years, with an operating margin of 11.33%, which ranks better than 70.94% of companies in the Chemicals industry. Furthermore, the company's growth ranks better than 62.45% of companies in the Chemicals industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is a reliable method of determining profitability. For the past 12 months, Tronox Holdings PLC's ROIC has been -4.07, and its WACC has been 7.55.
Conclusion
In conclusion, Tronox Holdings PLC (NYSE:TROX) appears to be modestly undervalued. Despite its poor financial condition, the company's profitability is fair, and its growth ranks better than 62.45% of companies in the Chemicals industry. To learn more about Tronox Holdings PLC stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
