Yahoo Finance IT Tech Packaging Stock Is Believed To Be Fairly Valued
- By GF Value
The stock of IT Tech Packaging (AMEX:ITP, 30-year Financials) is believed 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 $0.5727 per share and the market cap of $56.7 million, IT Tech Packaging stock is believed to be fairly valued. GF Value for IT Tech Packaging is shown in the chart below.
Because IT Tech Packaging 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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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. IT Tech Packaging has a cash-to-debt ratio of 0.25, which ranks in the middle range of the companies in Forest Products industry. Based on this, GuruFocus ranks IT Tech Packaging's financial strength as 5 out of 10, suggesting fair balance sheet. This is the debt and cash of IT Tech Packaging 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. IT Tech Packaging has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $100.9 million and loss of $0.23 a share. Its operating margin is -5.19%, which ranks worse than 83% of the companies in Forest Products industry. Overall, the profitability of IT Tech Packaging is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of IT Tech Packaging 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 IT Tech Packaging is -11.3%, which ranks worse than 83% of the companies in Forest Products industry. The 3-year average EBITDA growth is -24.8%, which ranks worse than 87% of the companies in Forest Products 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, IT Tech Packaging's ROIC is -2.46 while its WACC came in at 2.48. The historical ROIC vs WACC comparison of IT Tech Packaging is shown below:
In summary, the stock of IT Tech Packaging (AMEX:ITP, 30-year Financials) is estimated to be fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 87% of the companies in Forest Products industry. To learn more about IT Tech Packaging stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
