– By GF Value
The stock of Ulker Biskuvi Sanayi AS (OTCPK:UELKY, 30-year Financials) is estimated to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $26.31 per share and the market cap of $899.8 million, Ulker Biskuvi Sanayi AS stock is believed to be modestly undervalued. GF Value for Ulker Biskuvi Sanayi AS is shown in the chart below.
Because Ulker Biskuvi Sanayi AS is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 24.9% over the past five years.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Ulker Biskuvi Sanayi AS has a cash-to-debt ratio of 0.80, which is in the middle range of the companies in the industry of Consumer Packaged Goods. The overall financial strength of Ulker Biskuvi Sanayi AS is 5 out of 10, which indicates that the financial strength of Ulker Biskuvi Sanayi AS is fair. This is the debt and cash of Ulker Biskuvi Sanayi AS over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Ulker Biskuvi Sanayi AS has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.2 billion and earnings of $3.636 a share. Its operating margin is 15.15%, which ranks better than 84% of the companies in the industry of Consumer Packaged Goods. Overall, the profitability of Ulker Biskuvi Sanayi AS is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Ulker Biskuvi Sanayi AS over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Ulker Biskuvi Sanayi AS is 24.9%, which ranks better than 91% of the companies in the industry of Consumer Packaged Goods. The 3-year average EBITDA growth rate is 34.9%, which ranks better than 89% of the companies in the industry of Consumer Packaged Goods.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Ulker Biskuvi Sanayi AS’s return on invested capital is 12.31, and its cost of capital is 6.14. The historical ROIC vs WACC comparison of Ulker Biskuvi Sanayi AS is shown below:
Overall, the stock of Ulker Biskuvi Sanayi AS (OTCPK:UELKY, 30-year Financials) is believed to be modestly undervalued. The company’s financial condition is fair and its profitability is strong. Its growth ranks better than 89% of the companies in the industry of Consumer Packaged Goods. To learn more about Ulker Biskuvi Sanayi AS stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.