Yahoo Finance Sibanye Stillwater Stock Shows Every Sign Of Being Significantly Undervalued
- By GF Value
The stock of Sibanye Stillwater (NYSE:SBSW, 30-year Financials) is estimated to be significantly 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 $18.43 per share and the market cap of $13.5 billion, Sibanye Stillwater stock appears to be significantly undervalued. GF Value for Sibanye Stillwater is shown in the chart below.
Because Sibanye Stillwater is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth, which averaged 26.2% over the past five years.
Link: These companies may deliever higher future returns at reduced risk.
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. Sibanye Stillwater has a cash-to-debt ratio of 1.08, which is worse than 71% of the companies in Metals & Mining industry. GuruFocus ranks the overall financial strength of Sibanye Stillwater at 6 out of 10, which indicates that the financial strength of Sibanye Stillwater is fair. This is the debt and cash of Sibanye Stillwater over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Sibanye Stillwater has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $34 billion and earnings of $11.252 a share. Its operating margin is 30.87%, which ranks better than 86% of the companies in Metals & Mining industry. Overall, the profitability of Sibanye Stillwater is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Sibanye Stillwater 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 Sibanye Stillwater is 26.2%, which ranks better than 88% of the companies in Metals & Mining industry. The 3-year average EBITDA growth rate is 265.6%, which ranks better than 100% of the companies in Metals & Mining 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, Sibanye Stillwater's ROIC is 37.01 while its WACC came in at 11.88. The historical ROIC vs WACC comparison of Sibanye Stillwater is shown below:
In short, Sibanye Stillwater (NYSE:SBSW, 30-year Financials) stock is estimated to be significantly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 100% of the companies in Metals & Mining industry. To learn more about Sibanye Stillwater stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
