POSCO Holdings Inc (PKX, Financial) experienced a daily loss of 5.05%, but over the last three months, it saw a gain of 36.69%. Despite a solid Earnings Per Share (EPS) (EPS) of 3.12, the question arises: Is the stock significantly overvalued? This article aims to provide a comprehensive valuation analysis of POSCO Holdings (PKX) to answer this question. We invite you to delve into the following analysis to understand the intrinsic value of POSCO Holdings (PKX).
Introduction to POSCO Holdings (PKX, Financial)
POSCO Holdings Inc operates as a holding company through its subsidiaries. The company's operations are divided into four segments: Steel, Green Infrastructure Business, Green Materials and Energy, and Others. The Steel segment involves the production and sale of steel products. The Green Infrastructure Business segment includes infrastructure provision and related services. The Green Materials and Energy segment focuses on the manufacturing and sale of energy-related and other industrial materials. The Others segment comprises various other operations.
POSCO Holdings' current stock price is $101.1, significantly higher than its estimated fair value (GF Value) of $62.84. This discrepancy suggests that the stock might be overvalued. The income breakdown of POSCO Holdings is as follows:
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides a snapshot of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GuruFocus Value calculation, POSCO Holdings (PKX, Financial) is significantly overvalued. The stock's current price of $101.1 per share and the market cap of $30.70 billion strongly suggest this overvaluation. As a result, the long-term return of POSCO Holdings' stock is likely to be much lower than its future business growth.
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Financial Strength of POSCO Holdings
It's crucial to assess the financial strength of a company before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. POSCO Holdings boasts a cash-to-debt ratio of 0.69, superior to 62.86% of 587 companies in the Steel industry. Its overall financial strength is 6 out of 10, indicating fair financial stability.
This is the debt and cash of POSCO Holdings over the past years: 
Profitability and Growth of POSCO Holdings
Investing in profitable companies, especially those demonstrating consistent long-term profitability, poses less risk. POSCO Holdings has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $60.60 billion and an Earnings Per Share (EPS) of $3.12. Its operating margin is 3.29%, ranking worse than 55.22% of 603 companies in the Steel industry. Overall, GuruFocus ranks the profitability of POSCO Holdings at 7 out of 10, indicating fair profitability.
Growth is one of the most crucial factors in a company's valuation. According to GuruFocus research, long-term stock performance is closely correlated with growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of POSCO Holdings is 10%, ranking worse than 54.02% of 585 companies in the Steel industry. The 3-year average EBITDA growth is 4.9%, ranking worse than 69.23% of 507 companies in the Steel industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to 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 value for shareholders. Over the past 12 months, POSCO Holdings's ROIC was 4.24, while its WACC came in at 8.42.
The historical ROIC vs WACC comparison of POSCO Holdings is shown below: 
Conclusion
In conclusion, the stock of POSCO Holdings (PKX, Financial) is believed to be significantly overvalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 69.23% of 507 companies in the Steel industry. To learn more about POSCO Holdings stock, you can check out its 30-Year Financials here.
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