Cohen & Steers Stock Shows Every Sign Of Being Modestly Overvalued
- By GF Value
The stock of Cohen & Steers (NYSE:CNS, 30-year Financials) is estimated to be modestly overvalued, 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 $65.09 per share and the market cap of $3.1 billion, Cohen & Steers stock shows every sign of being modestly overvalued. GF Value for Cohen & Steers is shown in the chart below.
Because Cohen & Steers is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 2.9% over the past three years and is estimated to grow 8.34% annually over the next three to five years.
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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. Cohen & Steers has a cash-to-debt ratio of 1.18, which is in the middle range of the companies in Asset Management industry. The overall financial strength of Cohen & Steers is 6 out of 10, which indicates that the financial strength of Cohen & Steers is fair. This is the debt and cash of Cohen & Steers 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. Cohen & Steers has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $427.5 million and earnings of $1.58 a share. Its operating margin is 22.23%, which ranks in the middle range of the companies in Asset Management industry. Overall, the profitability of Cohen & Steers is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Cohen & Steers 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 Cohen & Steers is 2.9%, which ranks in the middle range of the companies in Asset Management industry. The 3-year average EBITDA growth rate is -14%, which ranks worse than 71% of the companies in Asset Management industry.
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, Cohen & Steers's ROIC was 28.79, while its WACC came in at 9.96. The historical ROIC vs WACC comparison of Cohen & Steers is shown below:
In summary, Cohen & Steers (NYSE:CNS, 30-year Financials) stock is believed to be modestly overvalued. The company's financial condition is fair and its profitability is strong. Its growth ranks worse than 71% of the companies in Asset Management industry. To learn more about Cohen & Steers 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.
