India Globalization Capital St – GuruFocus.com

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India Globalization Capital (AMEX: IGC, 30-year Financials) stock is showing all signs of significant overvaluation, according to GuruFocus’s valuation calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, the company’s past growth, and analysts’ estimates of the company’s future performance. If a share’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 1.58 per share and market cap of $ 76.4 million, India Globalization Capital stock is showing all signs of significant overvaluation. The GF value for India Globalization Capital is shown in the chart below.

Because India Globalization Capital is significantly overvalued, the long-term return on its stock is likely to be much lower than the future growth of its business.

Link: These companies can offer higher future returns with reduced risk.

Investing in companies with low financial strength presents a higher risk of permanent loss of capital. Thus, it is 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. India Globalization Capital has a cash to debt ratio of 14.85 which is better than 88% of companies in the conglomerate sector. GuruFocus ranks the overall financial strength of India Globalization Capital as 6 out of 10, which indicates that the financial strength of India Globalization Capital is fair. Here is India Globalization Capital’s debt and liquidity over the past few years:

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Companies that have historically been profitable over the long term pose less risk to investors who want to buy stocks. Higher profit margins usually dictate a better investment compared to a business with lower profit margins. India Globalization Capital has been profitable 0 in the past 10 years. During the past twelve months, the company achieved sales of $ 0.9 million and a loss of $ 0.22 per share. Its operating margin is -971.49%, which ranks in the bottom 10% of companies in the conglomerate industry. Overall, India Globalization Capital’s profitability is ranked 1 in 10, indicating low profitability. Here is India Globalization Capital’s revenue and net profit for the past few years:

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One of the most important factors in the valuation of a business is growth. Long-term equity performance is closely linked to growth, according to GuruFocus research. Companies that grow faster create more shareholder value, especially if that growth is profitable. India Globalization Capital’s average annual revenue growth is -35.4%, which ranks in the bottom 10% of companies in the conglomerate sector. The 3-year average EBITDA growth is -47%, which ranks in the bottom 10% of companies in the conglomerate sector.

Another way to assess a company’s profitability is to compare its return on invested capital (ROIC) to its weighted 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 should pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating shareholder value. Over the past 12 months, India Globalization Capital’s ROIC was -45.54, while its WACC stood at 30.36. India Globalization Capital’s historical ROIC vs WACC comparison is shown below:

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In conclusion, the stock of India Globalization Capital (AMEX: IGC, 30-year Financials) gives any indication that it is considerably overvalued. The financial situation of the company is fair and its profitability is poor. Its growth ranks among the bottom 10% of companies in the conglomerate industry. To learn more about India’s globalizing capital stock, you can view its 30-year financial data here.

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