Commercial Metals Co (CMC, Financial) experienced a daily loss of -8.47% and a 3-month loss of -11.16%. Despite these losses, the company's Earnings Per Share (EPS) stands at 8.09. The question is, is the stock fairly valued? This article aims to provide an in-depth valuation analysis of CMC. Let's delve into the details.
A Snapshot of Commercial Metals Co
Commercial Metals Co operates steel mills, steel fabrication plants, and metal recycling facilities mainly in the United States and Poland. The company's primary products are rebar and structural steel, which are essential for the nonresidential construction sector. As of October 12, 2023, the company's stock price is $44.25, while its GF Value, an estimation of fair value, stands at $45.29. This comparison suggests that the stock is fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It's calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line represents the fair value at which the stock should be traded. If the stock price is significantly above the GF Value Line, it's overvalued, and its future return is likely to be poor. Conversely, if it's significantly below the GF Value Line, its future return will likely be higher.
Commercial Metals Co's stock appears to be fairly valued according to the GuruFocus Value calculation. With its current price of $44.25 per share and a market cap of $5.20 billion, the stock's long-term return is likely to be close to the rate of its business growth.
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Assessing Commercial Metals Co's Financial Strength
Investing in companies with low financial strength could lead to permanent capital loss. Therefore, it's critical to review a company's financial strength before purchasing its shares. Commercial Metals Co's cash-to-debt ratio is 0.41, ranking worse than 50.93% of 589 companies in the Steel industry. However, GuruFocus ranks Commercial Metals Co's financial strength as 8 out of 10, indicating a strong balance sheet.
Profitability and Growth of Commercial Metals Co
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Commercial Metals Co has been profitable 10 over the past 10 years. With a revenue of $9 billion and Earnings Per Share (EPS) of $8.09 in the past twelve months, its operating margin is 14.13%, ranking better than 86.45% of 605 companies in the Steel industry. Overall, Commercial Metals Co's profitability is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. Commercial Metals Co's 3-year average annual revenue growth is 14.2%, ranking better than 60.54% of 588 companies in the Steel industry. Its 3-year average EBITDA growth rate is 50.4%, ranking better than 79.49% of 512 companies in the Steel industry.
ROIC vs. WACC
Another way to assess a company's profitability is to compare its return on invested capital (ROIC) to its weighted average cost of capital (WACC). If the ROIC is higher than the WACC, the company is creating value for shareholders. Over the past 12 months, Commercial Metals Co's ROIC was 20.45, while its WACC was 10.63.
Conclusion
Overall, Commercial Metals Co's stock appears to be fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 79.49% of 512 companies in the Steel industry. To learn more about Commercial Metals Co's stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
