Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued

GuruFocus.com
·4 min read

- By GF Value

The stock of Commercial Metals Co (NYSE:CMC, 30-year Financials) shows every sign of being significantly 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 $31.74 per share and the market cap of $3.8 billion, Commercial Metals Co stock shows every sign of being significantly overvalued. GF Value for Commercial Metals Co is shown in the chart below.


Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued
Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued

Because Commercial Metals Co is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 11.6% over the past three years and is estimated to grow 0.51% annually over the next three to five years.

Link: These companies may deliever higher future returns at reduced risk.

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. Commercial Metals Co has a cash-to-debt ratio of 0.36, which ranks in the middle range of the companies in Steel industry. Based on this, GuruFocus ranks Commercial Metals Co's financial strength as 6 out of 10, suggesting fair balance sheet. This is the debt and cash of Commercial Metals Co over the past years:

Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued
Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued

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. Commercial Metals Co has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $5.6 billion and earnings of $2.18 a share. Its operating margin of 7.72% better than 73% of the companies in Steel industry. Overall, GuruFocus ranks Commercial Metals Co's profitability as fair. This is the revenue and net income of Commercial Metals Co over the past years:

Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued
Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued

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 Commercial Metals Co is 11.6%, which ranks better than 71% of the companies in Steel industry. The 3-year average EBITDA growth is 35.5%, which ranks better than 89% of the companies in Steel industry.

Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Commercial Metals Co's return on invested capital is 11.00, and its cost of capital is 8.00. The historical ROIC vs WACC comparison of Commercial Metals Co is shown below:

Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued
Commercial Metals Co Stock Is Estimated To Be Significantly Overvalued

In summary, Commercial Metals Co (NYSE:CMC, 30-year Financials) stock is believed to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 89% of the companies in Steel industry. To learn more about Commercial Metals Co 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.

Recommended Stories

  • 'The Walking Dead' just delivered one of its most divisive episodes in years

    "Diverged," centered around Carol and Daryl's fractured friendship, is an episode fans will like or hate, showing the problem with pandemic episodes.

  • China warns companies against politicising actions regarding Xinjiang

    BEIJING (Reuters) -Sweden's H&M and other foreign companies facing a backlash in China after raising concerns about forced labour in Xinjiang should look into the issue seriously and not politicise their economic behaviour, Chinese officials said on Monday. H&M, Burberry, Nike and Adidas and other western brands have been hit by consumer boycotts in China since last week over comments about their sourcing of cotton in Xinjiang.

  • Sen. Lindsey Graham says preventing voters from receiving food or water while as they wait in line to cast ballots doesn't make 'a whole lot of sense'

    A new voting law signed by Georgia Gov. Brian Kemp last week prevents volunteers from handing out food or drinks to voters waiting in line.

  • Serial killer on federal death row dies at Indiana hospital

    A convicted serial killer whose victims included two young boys died Sunday at a hospital in Indiana, authorities said. Joseph Edward Duncan died at the medical center near United States Penitentiary, Terre Haute, where he was on death row, according to a statement from prosecutors in Riverside County, California. Duncan, 58, had been diagnosed with terminal brain cancer.

  • Myanmar air strikes send ethnic Karen fleeing to Thailand

    About 3,000 villagers from territory in eastern Myanmar controlled by the Karen ethnic minority fled across the border to Thailand on Sunday after Myanmar military aircraft dropped bombs on a Karen guerrilla position, according to workers for two humanitarian relief agencies. The afternoon bombing on an area on the Salween River in Karen State’s Mutraw district killed two Karen guerrillas and wounded many more, said a member of the Free Burma Rangers, which delivers medical assistance to villagers. Hsa Moo of the Karen Peace Support Network, a civil society group, said the area near the guerrilla position was settled by about 3,000 people, most of whom are believed to have fled across the nearby border to Thailand after the attack.

  • Suicide bomb hits Palm Sunday Mass in Indonesia, 20 wounded

    Two attackers believed to be members of a militant network that pledged allegiance to the Islamic State group blew themselves up outside a packed Roman Catholic cathedral during a Palm Sunday Mass on Indonesia’s Sulawesi island, wounding at least 20 people, police said. Rev. Wilhelmus Tulak, a priest at the Sacred Heart of Jesus Cathedral in Makassar, said he had just finished celebrating Palm Sunday Mass when a loud bang shocked his congregation.

  • 'It doesn't end here': Hundreds gather for AAPI support caravan, rally

    Hundreds of people gathered in the south Sacramento area Saturday for a caravan and rally in support of the #StopAsianHate movement. They drove cars decked out with signs and paint — displaying messages of support for the Asian American and Pacific Islander community — along several blocks of streets and eventually arrived at Florin Town Centre for a rally. The united message among all in attendance was, quite simply, "stop the hate." See more above.

  • How Tina Turner Paved the Way for Beyoncé

    HBOAfter six decades in entertainment, Tina Turner has had more than enough of the spotlight. The raspy-voiced singer has achieved her goal of becoming a rock & roll superstar that could sell out stadiums and arenas around the world, but she just couldn’t seem to get past mainstream media and the general public’s desire to constantly dwell on her past.Turner, 81, herself is still trying to shed the remnants of that trauma she’s experienced her entire life. Her HBO documentary, Tina, premiering on March 27, is the veteran entertainer’s official encore for her beloved fans as she closes the curtain to show business for good.Directed by Academy Award-winning filmmakers T.J. Martin and Daniel Lindsay, Tina’s approximate two-hour run time, told in five acts, chronicles her journey from Chitlin’ Circuit R&B chanteuse who experienced horrific physical and emotional abuse from her first husband and collaborator, Ike Turner, into a Grammy-winning, Guinness World Record-holder for her electrifying concert tours.The music doc explores the chart-topping contralto behind singles like “What’s Love Got to Do With It,” “Better Be Good to Me,” “We Don’t Need Another Hero (Thunderdome),” “Typical Male,” “The Best,” and “I Don’t Wanna Fight” defying an overtly racist, sexist and ageist music business in the 1980s to achieve MTV-era commercial success.“She gave us her honesty and vulnerability to reveal that kind of stuff to us,” Lindsay says. “Tina has a much more complicated, very different relationship with her own narrative than we as the public do. The public saw her as a survivor and symbol of strength and resilience, but just talking about that time in her life could bring up dreams where it feels as real to her as if it’s happening for the first time.” What Makes Aretha Franklin a Genius? Let Suzan-Lori Parks ExplainLindsay and Martin didn’t want to make Tina a sensational exposé. The Emmy-winning documentary filmmakers decided instead to tell a complex story that jump-cuts and crawls between candid interviews with Turner from her lavish Swiss estate, headlining tear sheets, interview sound bites, dissolving flashback sequences, and never-before-seen live performances that capture the Nutbush, Tennessee-born Anna Mae Bullock’s electrifying stage persona and dedication to her craft.Home movies further reveal Turner’s life off-stage as a mother of four sons and practicing Buddhist as she battled severe depression, attempted suicide, confronted abandonment issues, felt creatively stifled by Ike’s complacent, drug-induced musical direction, and ongoing bouts of PTSD.“We wanted to create an experience for people,” Martin, also Tina’s co-editor, offers. “It affects the notion of not being afraid to lean into the film for some truths and hardships people face. By not being truthful and honest with stories, you’re doing a disservice to the subject and the audience.”So Lindsay and Martin sifted through photographer Bob Gruen’s “hundreds of hours of footage and over 4,000 to 5,000 images” to build the story around Turner’s eye-opening People magazine cover story by journalist Carl Arrington published in December 1981. Tina features Oprah Winfrey, Turner’s former manager Roger Davies, music journalist Kurt Loder, actress Angela Bassett, playwright Katori Hall, songwriter Terry Britten, touring personnel, and Turner’s current husband, music executive Erwin Bach.When Lindsay and Martin first met Turner in 2019, they flew to her Zurich estate for the first of numerous trips. The I, Tina author was writing her second memoir, That’s My Life, and a self-help book, Happiness Becomes You: A Guide To Changing Your Life for Good, set to publish the following year. The Rock & Roll Hall of Fame inductee also had a Broadway production, Tina: The Tina Turner Musical.Turner, currently a Rock Hall nominee as a solo artist, wondered what the Lost Cup and Undefeated directors could possibly make a feature-length documentary about since her 1993 biopic starring Bassett, What’s Love Got to Do With It, was already a blockbuster success.Lindsay and Martin emphasized to Turner that they wanted Tina to give more visual nuance to what fans already knew of her personal life. The pair also wanted to introduce younger generations to her electrifying stage presence that was light years ahead of Beyoncé.“Our process is always to approach things from a place of genuine curiosity and empathy,” Lindsay maintains. “We were very upfront with her about what we’re really interested in.”“Once we started thinking about the story and compartmentalizing it, the visual grammar of the film started to make more sense to us. Once we dove in a bit more and learned about the epic circumstances of her ongoing narrative, we knew we could make a real film,” Martin adds.Production on Tina was a full-circle moment for Martin, who was born biracial in Seattle. He would tag along with his mother, a Black lead singer of a punk band, as a young kid in the early ‘80s. His mom, coincidentally named Tina, went onstage in leather skirts, makeup and spiky hair similar to the Private Dancer and Break Every Rule recording artist.“Men would hit on her and say, ‘Hey, Tina Turner!’” Martin remembers. “It was powerful because Tina Turner was the only woman of color they could associate with being a rock artist, and I was wondering who Tina Turner was.”The coronavirus pandemic disrupted Tina’s production schedule, but Lindsay and Martin continued working on the film from their homes. The surge of protests and marches against police brutality against unarmed Black and brown people sparked renewed interest in their unflinching 2017 documentary on the post-Rodney King riots, LA 92.Lindsay and Martin were doing additional press interviews for LA 92 while Tina was in post-production. “It’s always a trip when the world is in real time facing itself in the mirror,” Martin explains. “We were inherently pulled in two directions because half of the reason we make films is to create a space for the world to look at itself, hopefully in an honest manner.” HBO Tina made its world premiere at the Berlin Film Festival earlier this month. It’s the first time in the filmmakers’ careers they haven’t been able to catch the audience’s reactions on opening night. “That’s the thing you look for most,” Martin confirms. “It opens your eyes to understand your film better when you see it through the eyes of other people, and we just did not get that opportunity. This is all still a shock and surprise to us.”Tina doesn’t go into the music legend’s most recent battles with a stroke, kidney failure, intestinal cancer, and her son Craig committing suicide. It does highlight her love story and marriage to Bach.Lindsay and Martin hope Tina vividly illustrates how incredible of a showwoman Turner is and how her trials and tribulations can fuel people to make change in their lives where necessary.“We need survivors to come forward and tell their story so that other people that are living those circumstances can know they’re not alone,” Lindsay says. “I hope people watch this film and get an appreciation for how incredible Tina Turner is as a performer. She’s one in a million.”“The decision to survive is an ongoing process, and it’s made everyday,” Martin concludes. “It’s its own journey. As we continue to celebrate individuals who have experienced some really traumatic events in their lives, the courage they have taken to make themselves vulnerable to tell their story is for us to remind ourselves to remember the person at the center. It’s not just something you get over.”Read more at The Daily Beast.Get our top stories in your inbox every day. Sign up now!Daily Beast Membership: Beast Inside goes deeper on the stories that matter to you. Learn more.

  • British royal Kate launches book of portraits to remember pandemic

    Kate, the Duchess of Cambridge, on Sunday launched a book of photographic portraits taken during Britain's COVID-19 lockdowns that she said would provide a lasting record of the pandemic. Kate, who is married to Prince William, the Queen's grandson and second in line to the throne, began the project with the National Portrait Gallery last year, inviting people to submit photos taken during Britain's first coronavirus lockdown. A panel of judges including Kate chose 100 portraits from over 31,000 entries, which were shown in digital and community exhibitions before the book was announced.

  • ‘Is this patriot enough?’ Asian American war vet and public official takes shirt off to show scars in powerful town hall speech about discrimination

    Official said voters told him he “did not look American enough” while he was campaigning

  • Attorney for Georgia lawmaker calls charges 'overreach'

    An attorney for a Georgia lawmaker who was charged with two felonies after knocking on the door to the governor’s private office said authorities overreached in the case, which unfolded while the governor spoke on live television about a sweeping overhaul of state elections. State police arrested state Rep. Park Cannon, an Atlanta Democrat, on Thursday after she said she wanted to see Republican Gov. Brian Kemp sign the law that places new restrictions on voting by mail and gives lawmakers more power to oversee elections. Cannon was charged with obstruction of law enforcement and disruption of the General Assembly.

  • Five injured, hundreds evacuated after massive blaze at Indonesia oil refinery

    JAKARTA (Reuters) -Indonesian state oil company Pertamina said on Monday it was trying to control a massive fire at its Balongan oil refinery in West Java that injured five people and led to the evacuation of 950 nearby residents. The fire began just after midnight on Sunday evening, media reported, with videos shared on social media showing huge flames engulfing the refinery, while a large explosion can be heard. Pertamina said in a statement the fire at the refinery, which can process 125,000 barrels per day, broke out during bad weather.

  • Sharon Osbourne leaves US morning show 'The Talk' after investigation into racism discussion

    Sharon Osbourne has left US daytime show "The Talk" after the network said her defence of Piers Morgan's comments about the Duchess of Sussex did not "align with a respectful workplace". Osbourne clashed with her co-hosts on the CBS show earlier this month while defending Morgan, who left his job on ITV's Good Morning Britain following his comments about the duchess. Her comments led to a heated on-air discussion about racism with her black co-host, Sheryl Underwood. CBS said Osbourne, 68, had decided to leave the show after a review that found in part that "Sharon's behavior toward her co-hosts during the March 10 episode did not align with our values for a respectful workplace." The network also said its internal inquiry indicated the show's presenters, including Osbourne and Underwood, were not properly prepared by the production team for a discussion on race.

  • Ex-Gov. Andrew Cuomo aide was asked to sing 'Danny Boy' for him in 2019, attorney says

    One of Gov. Andrew Cuomo's former aides was asked to sing "Danny Boy" for him in 2019, her lawyer told the USA TODAY Network last week.

  • Virginia Beach Police Chief Admits Cops Have No Idea if Black Man Shot by Officer Was Armed

    Kevin Mohatt/ReutersAs questions swirled Saturday over the police shooting of a 25-year-old Black man during multiple chaotic shootings in Virginia Beach, city police chief Paul Neudigate admitted to reporters late Saturday that there is no bodycam footage of the confrontation—and police have no idea if the man was armed. “I don’t have a whole lot of answers,” Neudigate said about the death of Donovan Lynch, which he said was “still very much under investigation.”Lynch was killed at the hands of police as officers responded to a gunfight they said erupted while they were dealing with another, unrelated shooting nearby. Police said they faced “three separate shooting events” along the city’s oceanfront on Friday night. Three men have been arrested in connection with the first shooting of the night, which left eight people injured and occurred just minutes before the second shooting. But the circumstances of the second shooting, during which Lynch was killed, remain unclear. Neudigate said only that the incident began as a physical altercation until multiple people drew weapons. One other victim died in the shooting, 29-year-old Desheyla Harris, whom Neudigate described as “an innocent victim struck by stray gunfire.”Before Lynch was identified by police as the victim of an officer-involved shooting, an initial press release described the man killed as “an armed citizen.” But Neudigate openly admitted late Saturday that authorities do not actually know if Lynch was armed. Instead, Neudigate could only say that “there was a firearm recovered in the vicinity of where this incident occurred.”Asked by a reporter if police had evidence of the gun belonging to Lynch, or of Lynch being armed at the time he was shot, Neudigate answered point-blank: “No. At this point, no.”Neudigate also could not say how many times Lynch was shot. And if anyone was hoping the bodycam footage could clear things up, the police chief said the camera was not on at the time of the fatal shooting. “There is no bodycam footage. The officer was wearing a body cam, but it was not activated,” he said, adding that the reason for the body camera being turned off would be “part of our investigation.” “We don’t know what the circumstances were that preceded the shooting. There is an expectation [officers] activate the body camera.”Investigators had not yet interviewed the officer who shot Lynch, he said.“I do not have the answers the community is looking for,” the police chief conceded. “I’m not able to stand in front of my community and answer the hard questions.”Police have arrested three men in connection with the shooting: Ahmon Adams, 22, Nyquez Baker, 18, and Devon Dorsey Jr, 20.The press conference ended with a protester chanting “No justice, no peace!” The person could be heard calling Lynch’s death “a murder.”Read more at The Daily Beast.Get our top stories in your inbox every day. Sign up now!Daily Beast Membership: Beast Inside goes deeper on the stories that matter to you. Learn more.

  • Kamala Harris is reportedly 'bothered' that she hasn't been able to move into her official Washington DC residence over two months after inauguration

    An administration official told CNN that it is "unclear" why the renovations are still ongoing, but Harris is reportedly "bothered" by the delay.

  • Elite school 'rape culture' scandal: Whitehall launches national investigation

    Britain's elite schools are at the centre of a major Whitehall investigation involving police chiefs, government officials and Ofsted over their handling of the emerging "rape culture" scandal among pupils. Officials from the Home Office and Department for Education are leading a cross-Government response with senior officers, who have been urged to take claims seriously. Inspectors from Ofsted and the Independent Schools Inspectorate are ready to launch immediate and surprise investigations if safeguarding concerns are raised at particular schools, Whitehall sources said. On Saturday night a senior officer said thousands of current and former pupils had come forward as a result of a website "shining a light on peer-on-peer abuse within educational settings across the UK". Officers are examining accounts on the site, called Everyone's Invited, after the National Police Chiefs Council and Government officials met its organiser last week. Robert Halfon, the chairman of the Commons education select committee, criticised senior school staff for being more worried about "woke" issues than the "welfare of students". Writing for The Telegraph, Mr Halfon called for an independent inquiry and demanded that an education minister make a statement in Parliament after the Easter recess.

  • Three weeks before George Floyd killing, accused officers violently detained another Black man

    Derek Chauvin’s trial begins on Monday 29 March

  • Tow truck driver dies after being struck in suspected DUI crash in Sacramento

    A tow truck driver died after being struck by a suspected DUI driver on Interstate 5 in Sacramento on Saturday night, according to the California Highway Patrol. See more above.

  • Baltimore will no longer prosecute for drug possession, prostitution, or other low-level crimes after pandemic experiment 'success'

    Baltimore officials said crime was down over the past year with the policies in place, despite other American cities experiencing a rise in crime.