Yahoo Finance B. Riley Financial Stock Gives Every Indication Of Being Fairly Valued
- By GF Value
The stock of B. Riley Financial (NAS:RILY, 30-year Financials) is estimated to be fairly valued, 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 $69.71 per share and the market cap of $1.9 billion, B. Riley Financial stock appears to be fairly valued. GF Value for B. Riley Financial is shown in the chart below.
Because B. Riley Financial is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 36.9% over the past five years.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. B. Riley Financial has a cash-to-debt ratio of 0.09, which is in the bottom 10% of the companies in the industry of Diversified Financial Services. GuruFocus ranks the overall financial strength of B. Riley Financial at 4 out of 10, which indicates that the financial strength of B. Riley Financial is poor. This is the debt and cash of B. Riley Financial over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. B. Riley Financial has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $1.5 billion and earnings of $20.18 a share. Its operating margin of 56.48% better than 86% of the companies in the industry of Diversified Financial Services. Overall, GuruFocus ranks B. Riley Financial's profitability as fair. This is the revenue and net income of B. Riley Financial 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 B. Riley Financial is 36.9%, which ranks better than 95% of the companies in the industry of Diversified Financial Services. The 3-year average EBITDA growth rate is 102.9%, which ranks better than 99% of the companies in the industry of Diversified Financial Services.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, B. Riley Financial's ROIC was 25.84, while its WACC came in at 6.83. The historical ROIC vs WACC comparison of B. Riley Financial is shown below:
In summary, The stock of B. Riley Financial (NAS:RILY, 30-year Financials) is estimated to be fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks better than 99% of the companies in the industry of Diversified Financial Services. To learn more about B. Riley Financial stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
