Yahoo Finance Dirtt Environmental Solutions Stock Is Believed To Be Fairly Valued
- By GF Value
The stock of Dirtt Environmental Solutions (NAS:DRTT, 30-year Financials) shows every sign of being 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 $3.22 per share and the market cap of $271.9 million, Dirtt Environmental Solutions stock gives every indication of being fairly valued. GF Value for Dirtt Environmental Solutions is shown in the chart below.
Because Dirtt Environmental Solutions is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Dirtt Environmental Solutions has a cash-to-debt ratio of 1.11, which which ranks in the middle range of the companies in Construction industry. The overall financial strength of Dirtt Environmental Solutions is 6 out of 10, which indicates that the financial strength of Dirtt Environmental Solutions is fair. This is the debt and cash of Dirtt Environmental Solutions over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Dirtt Environmental Solutions has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $171.5 million and loss of $0.127 a share. Its operating margin is -5.15%, which ranks worse than 86% of the companies in Construction industry. Overall, GuruFocus ranks the profitability of Dirtt Environmental Solutions at 4 out of 10, which indicates poor profitability. This is the revenue and net income of Dirtt Environmental Solutions over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Dirtt Environmental Solutions is -8.8%, which ranks worse than 78% of the companies in Construction industry. The 3-year average EBITDA growth is -22.4%, which ranks worse than 87% of the companies in Construction industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Dirtt Environmental Solutions's ROIC is -10.02 while its WACC came in at 12.41. The historical ROIC vs WACC comparison of Dirtt Environmental Solutions is shown below:
Overall, the stock of Dirtt Environmental Solutions (NAS:DRTT, 30-year Financials) is estimated to be fairly valued. The company's financial condition is fair and its profitability is poor. Its growth ranks worse than 87% of the companies in Construction industry. To learn more about Dirtt Environmental Solutions stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
