– By GF value
The stock of President Chain Store (TPE: 2912, 30-year financial data) is estimated to be slightly undervalued, as calculated by GuruFocus Value. GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock has traded, past growth in business and analysts’ estimates of the company’s future performance. If a stock’s price is significantly above the GF value line, it is overvalued and its future performance is likely to be poor. On the other hand, if it is significantly lower than the GF value line, its future return will probably be higher. At its current price of NT $ 272 per share and its market cap of NT $ 282.8 billion, the President Chain Store stock would be slightly undervalued. The GF value for President Chain Store is shown in the table below.
Because President Chain Store is relatively undervalued, the long-term return on its inventory is likely to be greater than its business growth, which has averaged 5.4% over the past three years and is expected to grow by 3%. , 56% per year over the next three to five years. .
Investing in companies with low financial strength carries a higher risk of permanent loss of capital. It is therefore important to carefully consider the financial strength of a company before deciding whether or not to buy its shares. Examining the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a business. President Chain Store has a cash to debt ratio of 0.54, which is in the mid-range of companies in the retail sector – defensive. GuruFocus ranks President Chain Store’s overall financial strength as 5 out of 10, which indicates that President Chain Store’s financial strength is fair. Here is President Chain Store’s debt and cash flow over the past few years:
It is less risky to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A business with high profit margins is also generally a safer investment than a business with low profit margins. President Chain Store has been profitable 10 in the past 10 years. During the past twelve months, the company achieved sales of NT $ 260.5 billion and profit of NT $ 9.98 per share. Its operating margin is 4.68%, which ranks better than 69% of companies in the Retail – Defensive industry. Overall, GuruFocus ranks President Chain Store’s profitability at 7 out of 10, which indicates fair profitability. Here is President Chain Store’s sales and net income for the past few years:
One of the most important factors in the valuation of a business is growth. Long-term equity performance is strongly correlated with growth according to the GuruFocus study. Firms that grow faster create more shareholder value, especially if that growth is profitable. President Chain Store’s average annual revenue growth is 5.4%, which ranks in the mid-range of companies in the retail industry – defensive. the Average EBITDA growth over 3 years is -9.1%, which ranks worse than 84% of companies in the retail sector – defensive.
One can also assess 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 the extent to which a business 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 of its security holders to fund its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely to create value for its shareholders. Over the past 12 months, President Chain Store’s ROIC is 6.61, while its WACC is 1.09. The historical comparison of President Chain Store’s ROIC and WACC is shown below:
To conclude, the stock of President Chain Store (TPE: 2912, Financials over 30 years) appears to be slightly undervalued. The company’s financial position is fair and its profitability is fair. Its growth ranks worse than 84% of companies in the Retail – Defensive industry. To learn more about the President Chain Store’s stock, you can view its 30-year financials here.
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This article first appeared on GuruFocus.