Kewaunee’s scientific stock is B
The stock of Kewaunee Scientific (NAS: KEQU, 30-year Financials) would be slightly undervalued, according to the calculation of GuruFocus Value. 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, past business growth, and analysts’ estimates of future business performance. If a stock’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 $ 11.75 per share and market cap of $ 32.5 million, Kewaunee Scientific stock is estimated to be slightly undervalued. The GF value for Kewaunee Scientific is shown in the table below.
Given that Kewaunee Scientific is relatively undervalued, its long-term stock return is likely to outperform its business growth, which has averaged 1.8% over the past five years.
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Since investing in companies with poor financial strength could result in a permanent loss of capital, investors should carefully consider the financial strength of a company before deciding whether or not to buy shares. Examining the cash-to-debt ratio and interest coverage can provide a good initial perspective on the financial strength of the business. Kewaunee Scientific has a cash-to-debt ratio of 0.39, which is worse than 71% of companies in the furniture, lighting and home appliance industry. Based on this, GuruFocus ranks Kewaunee Scientific’s financial strength at 4 out of 10, suggesting a poor track record. Here is Kewaunee Scientific’s debt and cash flow over the past few years:
It is less risky to invest in profitable companies, especially those whose profitability is constant over the long term. A business with high profit margins is generally a safer investment than one with low profit margins. Kewaunee Scientific has been profitable 9 in the past 10 years. In the past twelve months, the company achieved sales of $ 143 million and a loss of $ 0.65 per share. Its operating margin is -1.85%, which is worse than 83% of companies in the furniture, lighting and home appliance industry. Overall, Kewaunee Scientific’s profitability is ranked 6 out of 10, indicating acceptable profitability. Here is Kewaunee Scientific’s sales and net income for the past few years:
Growth is probably one of the most important factors in the valuation of a business. GuruFocus research has shown that growth is closely tied to the long-term performance of a company’s stocks. If a company’s business is growing, the business typically creates value for its shareholders, especially if the growth is profitable. Likewise, if the income and profits of a business decrease, the value of the business will decrease. Kewaunee Scientific’s 3-year average revenue growth rate is within the range of companies in the furniture, lighting and home appliance industry. Kewaunee Scientific’s 3-year average EBITDA growth rate is -69.4%, which ranks in the bottom 10% of companies in the furniture, fixtures and appliances industry.
A company’s profitability can also be assessed 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 should 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 to create value for its shareholders. Over the past 12 months, Kewaunee Scientific’s ROIC is -2.48 while its WACC is 5.32. Kewaunee Scientific’s historical ROIC vs WACC comparison is shown below:
In short, the stock of Kewaunee Scientific (NAS: KEQU, 30 years Financials) gives all indications of a modest undervaluation. The company’s financial situation is bad and its profitability is fair. Its growth ranks among the bottom 10% of companies in the furniture, lighting and appliance industry. To learn more about Kewaunee Scientific’s stock, you can view its 30-year financial data here.
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