Gentherm Inc (THRM, Financial) experienced a daily loss of 15.58% and a three-month loss of 21.77%. Despite this, it reported an Earnings Per Share (EPS) (EPS) of 0.35. This raises the question: is Gentherm significantly undervalued? This article offers a comprehensive valuation analysis of Gentherm, providing insights into its financial health and future prospects.
Company Introduction
Gentherm Inc is a leading manufacturer of automotive parts. The company's operations span across two primary segments: Automotive and Medical. The Automotive segment, which contributes the majority of the company's revenue, includes automotive climate comfort systems, automotive cable systems, battery performance solutions, and automotive electronics and software systems. The Medical segment focuses on patient temperature management in the healthcare industry. Gentherm has a global presence, with significant operations in the United States, China, South Korea, Germany, Japan, and the Czech Republic.
Gentherm's stock price stands at $44.47, while its GF Value, an estimation of fair value, is $97.65. This significant disparity suggests that Gentherm may be undervalued. The subsequent sections will delve deeper into Gentherm's intrinsic value, integrating financial assessment with key company details.
GF Value Summary
The GF Value represents the current intrinsic value of a stock, calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus' valuation method, Gentherm (THRM, Financial) appears to be significantly undervalued. The GF Value Line suggests that if the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. With a current price of $44.47 per share and a market cap of $1.50 billion, Gentherm appears to be significantly undervalued.
Given that Gentherm is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Gentherm's cash-to-debt ratio of 0.69 ranks better than 52.27% of 1232 companies in the Vehicles & Parts industry. Overall, Gentherm's financial strength is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is typically less risky. Gentherm has been profitable 10 over the past 10 years, with high profit margins indicating safer investment than those with low profit margins. Over the past twelve months, the company had a revenue of $1.40 billion and an Earnings Per Share (EPS) of $0.35. Its operating margin is 5.42%, which ranks better than 54.38% of 1267 companies in the Vehicles & Parts industry. Overall, Gentherm's profitability is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. GuruFocus research has found that growth is closely correlated with the long-term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Gentherm is 7.2%, which ranks better than 55.06% of 1206 companies in the Vehicles & Parts industry. However, the 3-year average EBITDA growth rate is -7.2%, which ranks worse than 76.13% of 1081 companies in the same industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company 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 its security holders to finance its assets. Ideally, the return on invested capital should be higher than the weighted cost of capital. For the past 12 months, Gentherm's return on invested capital is 4.26, and its cost of capital is 10.95.
Conclusion
In summary, Gentherm (THRM, Financial) appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 76.13% of 1081 companies in the Vehicles & Parts industry. To learn more about Gentherm'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.
