SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued

GuruFocus.com
·4 min read

- By GF Value

The stock of SiteOne Landscape Supply (NYSE:SITE, 30-year Financials) is estimated to be 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 $176.85 per share and the market cap of $7.8 billion, SiteOne Landscape Supply stock is estimated to be significantly overvalued. GF Value for SiteOne Landscape Supply is shown in the chart below.


SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued
SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued

Because SiteOne Landscape Supply 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 5.13% annually over the next three to five years.

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

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. SiteOne Landscape Supply has a cash-to-debt ratio of 0.10, which is worse than 88% of the companies in Industrial Distribution industry. The overall financial strength of SiteOne Landscape Supply is 6 out of 10, which indicates that the financial strength of SiteOne Landscape Supply is fair. This is the debt and cash of SiteOne Landscape Supply over the past years:

SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued
SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued

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. SiteOne Landscape Supply has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $2.7 billion and earnings of $2.74 a share. Its operating margin is 6.65%, which ranks better than 71% of the companies in Industrial Distribution industry. Overall, the profitability of SiteOne Landscape Supply is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of SiteOne Landscape Supply over the past years:

SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued
SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued

Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. SiteOne Landscape Supply's 3-year average revenue growth rate is better than 82% of the companies in Industrial Distribution industry. SiteOne Landscape Supply's 3-year average EBITDA growth rate is 18.8%, which ranks better than 77% of the companies in Industrial Distribution 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, SiteOne Landscape Supply's return on invested capital is 11.33, and its cost of capital is 8.34. The historical ROIC vs WACC comparison of SiteOne Landscape Supply is shown below:

SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued
SiteOne Landscape Supply Stock Gives Every Indication Of Being Significantly Overvalued

To conclude, the stock of SiteOne Landscape Supply (NYSE:SITE, 30-year Financials) is estimated to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 77% of the companies in Industrial Distribution industry. To learn more about SiteOne Landscape Supply 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

  • 3 Top Travel Stocks to Watch in April

    If you're thinking about traveling again you may as well start thinking about travel stocks, too.

  • Border agents stop, arrest two Yemeni men on FBI terror watch list

    FOX News' Alex Hogan reports on migrant crossings and large-scale drug seizures on southern border

  • Hume on '60 Minutes' DeSantis piece: 'Not finest hour of journalism'

    FOX News senior political analyst reacts to CBS targeting Florida GOP governor on 'Special Report'

  • Piers Morgan suggested to Tucker Carlson that Meghan Markle may be 'completely delusional' while saying he really doesn't know or care

    Morgan spoke on camera for the first time since leaving his job, settling scores for over an hour on Fox's new streaming show "Tucker Carlson Today."

  • After new law, McConnell warns CEOs: 'Stay out of politics'

    Senate Republican leader Mitch McConnell says it's a “big lie” to call the new voting law in Georgia racist and he warned big business to “stay out of politics" after major corporations and even Major League Baseball distanced themselves from the state amid vast public pressure. McConnell particularly slammed President Joe Biden's criticism that the Georgia bill was restrictive and a return to Jim Crow-era restrictions in the Southern states aimed limiting ballot access for Black Americans. “It’s simply not true,” McConnell told reporters Monday.

  • Southwest pilot accused of exposing his genitals during a flight from Philadelphia to Orlando

    The pilot "intentionally committed an act of lewd, indecent and obscene exposure of his genitals in a public place," the Department of Justice alleged.

  • Former Matt Gaetz staffer’s press conference sheds little new light on allegations against Florida congressman

    A Monday press conference called by a former staffer of Rep. Matt Gaetz failed to shed any new light on the ongoing Justice Department investigation into the Florida congressman’s relationship with a 17-year-old girl and potential payments for sex to other women.

  • 3-year-old dies after tumbling into campground septic tank, New Jersey officials say

    Officials found the girl unresponsive when they arrived.

  • Today's global economy runs on standardized shipping containers, as the Ever Given fiasco illustrates

    Beachgoers near Cairo watch a massive container ship sail to the Red Sea. AP Photo/Amr NabilTake a look around you. Perhaps you’re snacking on a banana, sipping some coffee or sitting in front of your computer and taking a break from work to read this article. Most likely, those goods – as well as your smartphone, refrigerator and virtually every other object in your home – were once loaded onto a large container in another country and traveled thousands of miles via ships crossing the ocean before ultimately arriving at your doorstep. Today, an estimated 90% of the world’s goods are transported by sea, with 60% of that – including virtually all your imported fruits, gadgets and appliances – packed in large steel containers. The rest is mainly commodities like oil or grains that are poured directly into the hull. In total, about US$14 trillion of the world’s goods spend some time inside a big metal box. In short, without the standardized container – like the thousands that helped to keep the Ever Given stuck in the mud along the Suez Canal, snarling traffic for almost a week – the global supply chain that society depends upon would not exist. About 30% of global container shipping volumes transit through the Suez Canal. The Ever Given incident reveals several kinks in the modern supply chain. But, as an expert on the topic, I think it also highlights the importance of the simple yet essential cargo containers that, from a distance, resemble lego blocks floating on the sea. Trade before the container Since the dawn of commerce, people have been using boxes, sacks, barrels and containers of varying sizes to transport goods over long distances. Phoenicians in 1600 B.C. Egypt ferried wood, fabrics and glass to Arabia in sacks via camel-driven caravans. And hundreds of years later, the Greeks used ancient storage containers known as amphorae to transport wine, olive oil and grain on triremes that plied the Mediterranean and neighboring seas to other ports in the region. Even as trade grew more advanced, the process of loading and unloading as goods were transferred from one method of transportation to another remained very labor-intensive, time-consuming and costly, in part because containers came in all shapes and sizes. Containers from a ship being transferred onto a smaller rail car, for example, often had to be opened up and repacked into a boxcar. Different-sized packages also meant space on a ship could not be effectively utilized and also created weight and balance challenges for a vessel. And goods were more likely to experience damage from handling or theft due to exposure. Ceramic containers called amphorae were often used by the Greeks and others to transfer liquids like wine as well as grains. PHAS/Universal Images Group via Getty Images A trade revolution The U.S. military began exploring the use of standardized small containers to more efficiently transport guns, bombs and other materiel to the front lines during World War II. But it was not until the 1950s that American entrepreneur Malcolm McLean realized that by standardizing the size of the containers being used in global trade, loading and unloading of ships and trains could be at least partially mechanized, thereby making the transfer from one mode of transportation to another seamless. This way products could remain in their containers from the point of manufacture to delivery, resulting in reduced costs in terms of labor and potential damage. In 1956, McLean created the standard cargo container, which we basically still use today. He originally built it at a length of 33 feet – soon increased to 35 – and eight feet wide and tall. The Matson Hawaiian Citizen was one of the first ships converted into a container vessel, seen here at a San Francisco pier in 1963. AP Photo This dramatically reduced the cost of loading and unloading a ship. In 1956, hand-loading a ship cost $5.86 per ton; the standardized container cut that cost to just 16 cents a ton. It also made it much easier to protect cargo from the elements or pirates, since the container is made of durable steel and remains locked during transport. The U.S. made great use of this innovation during the Vietnam War to ship supplies to soldiers, who sometimes even used the containers as shelters. Today, the standard container size is 20 feet long, the same width, but more commonly half a foot taller – a size that’s become known as a “20-foot-equivalent container unit,” or TEU. There are actually a few different “standard” sizes, such as 40 feet long or a little taller, though they all have the same width. One of the key advantages is that whatever size a ship uses, they all, like lego blocks, fit neatly together with virtually no empty spaces. This innovation made the modern globalized world possible. The quantity of goods carried by containers soared from 102 million metric tons in 1980 to about 1.83 billion metric tons as of 2017. Most of the containerized traffic flows across the Pacific Ocean or between Europe and Asia – usually through the Suez Canal. Ships get huge The standardization of container sizes has also led to a surge in ship size. The more containers packed on a ship, the more a shipping company can earn on each journey. In fact, the average size of a container ship has doubled in the past 20 years alone. The largest ships sailing today are capable of hauling 24,000 containers – that’s a carrying capacity equivalent to how much a freight train 44 miles long could hold. Put another way, a ship named the Globe with a capacity of 19,100 20-foot containers could haul 156 million pairs of shoes, 300 million tablet computers or 900 million cans of baked beans – in case you’re feeling hungry. The Ever Given was loaded with over 18,000 containers. AP Photo/Mohamed Elshahed The Ever Given has a similar capacity of 20,000 containers, though it was only carrying 18,300 when it got stuck in the Suez Canal. In terms of cost, imagine this: The typical pre-pandemic price of transporting a 20-foot container from Asia to Europe carrying over 20 tons of cargo was about the same as an economy ticket to fly the same journey. Cost of success But the growing size of ships has a cost, as the Ever Given’s predicament showed. Maritime shipping has grown increasingly important to global supply chains and trade, yet it was rather invisible until the recent logjam and blockage of the Suez Canal. As the Ever Given was traversing the narrow 120-mile canal, fierce wind gusts blew it to the bank, and its 200,000 tons of weight got it stuck in the muck. About 12% of the world’s global shipping traffic passes through this canal. The blockage had, at one point, at least 369 ships stuck waiting to pass through the canal from either side, costing an estimated $9.6 billion a day. That translates to $400 million an hour, or $6.7 million a minute. Standardized shipping containers like these 40-foot ones made globalization possible. AP Photo/Stephen B. Morton Ship-building companies continue to work on building ever-larger container vessels, and there’s little evidence this trend will stop anytime soon. Some forecast that ships capable of carrying loads 50% times bigger than the Ever Given’s will be plying the open seas by 2030. In other words, the standardized shipping container remains more popular – and in demand – than ever. [You’re smart and curious about the world. So are The Conversation’s authors and editors. You can get our highlights each weekend.]This article is republished from The Conversation, a nonprofit news site dedicated to sharing ideas from academic experts. It was written by: Anna Nagurney, University of Massachusetts Amherst. Read more:Suez Canal blockage: how cargo ships like Ever Given became so huge, and why they’re causing problemsSuez canal: what the ‘ditch’ meant to the British empire in the 19th century Anna Nagurney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

  • Northeast Dems Threaten to Block Biden’s Infrastructure Package Unless Tax Deductions Included

    Democratic lawmakers in recent days have criticized facets of President Biden’s $2.3 trillion infrastructure plan, including northeastern representatives who say they will not support any bill that does not remove the caps on state-and-local-tax deductibility. As it stands, the bill does not include language to remove the caps, which were set at $10,000 in the 2017 tax law. While House Speaker Nancy Pelosi (D., Calif.) said she was sympathetic to that idea, according to the Wall Street Journal, the White House has said lawmakers should propose a way to fund the deduction. In a letter to Treasury Secretary Janet Yellen last week, a group of Democratic lawmakers from New Jersey, New York, and Minnesota indicated that they “could not vote for a bill that has a meaningful tax impact on our constituents unless it restores SALT deduction relief to our middle-class families.” Representative Tom Suozzi (D., N.Y.) was one of the signatories, and while Punchbowl News suggested the letter was less strict than his previous “No SALT, no deal” stance, the New York Democrat said there was “no softening” in his position. “No SALT, no deal,” he reiterated to the newsletter. However, other Democrats in the group reportedly acknowledged to Punchbowl News that they “do not have a real strategy and that they will likely vote for the deal even if the SALT provision isn’t included.” Meanwhile, a number of Democrats have been critical of Biden’s proposed tax increases on corporations as part of the infrastructure plan that would raise the corporate tax rate to 28 percent from 21 percent and increase taxes on companies’ foreign earnings. The White House said the tax increases would cover the cost of the $2.3 trillion package over 15 years. The measure proposes funding improvements to roads, bridges, and transit systems, as well as expanding broadband access and other efforts. However, some members of the president’s own party have instead recommended borrowing money to pay for the investments in the bill or raising other levies, such as the gasoline tax. Representative Peter DeFazio (D., Ore.), the chairman of the House Transportation and Infrastructure Committee, indicated he did not believe paying the entire cost of the plan through tax increases was necessary, according to the Journal. DeFazio said he would back an increase in the gas and diesel tax to pay for the new investments, in addition to more borrowing. Still, the White House and a number of other Democrats don’t support increasing the gas tax or collecting revenue from electric vehicles. They have argued that the taxes disproportionately affect lower-income people could discourage greener transport. Even with a Democratic majority, Biden will have a difficult time passing the legislation if he cannot garner near-unanimous support in the party to move the measure forward without Republican votes.

  • Japan expresses concerns to China about territorial waters, Hong Kong, Uighur situation

    Japanese Foreign Minister Toshimitsu Motegi on Tuesday expressed strong concerns to his Chinese counterpart about Chinese incursions into territorial waters, the situation in Hong Kong and the human rights situation of China's Uighur minority. China's extensive territorial claims in the East and South China Seas have become a priority issue in an increasingly testy Sino-U.S relationship and are a security concern for Japan.

  • 'Stay out of politics,' Republican leader McConnell tells U.S. CEOs, warns of 'consequences'

    U.S. Senate Republican Leader Mitch McConnell lashed out at corporate America on Monday, warning CEOs to stay out of the debate over a new voting law in Georgia that has been criticized as restricting votes among minorities and the poor. McConnell warned companies there could be risks for turning on the party, but he did not elaborate. "Corporations will invite serious consequences if they become a vehicle for far-left mobs to hijack our country from outside the constitutional order," McConnell told a news conference in his home state of Kentucky.

  • See ya Sam: Jets trade Darnold to Panthers for 3 draft picks

    Sam Darnold was the face of a hopeful franchise, a promising playmaker who might just be the New York Jets’ quarterback for at least the next decade. Darnold was traded Monday to the Carolina Panthers, ending months of speculation and a stint in New York that was marked by a few flashes of brilliance, inconsistent play and unfortunate injuries.

  • Chris Hemsworth says he's not considered a 'serious actor' because he's never gained or lost an 'unhealthy' amount of weight for a role

    The Marvel star opened up about his fitness journey and bulking up for the role of Thor in a new interview with The Telegraph.

  • A 'Jeopardy!' contestant left interim host Aaron Rodgers speechless by referencing a controversial Packers' play

    Three months after the NFC Championship, Aaron Rodgers still doesn't have an answer as to why the Packers kicked a field goal vs. the Bucs.

  • Rescuers hampered by damaged roads, more rain in Indonesia

    Rescuers were hampered by damaged bridges and roads and a lack of heavy equipment Monday after torrential rains caused multiple disasters on remote eastern Indonesian islands as well as in East Timor. At least 133 people died and dozens were missing in Indonesia, and 27 deaths were reported in East Timor. A tropical cyclone causing the damage is expected to continue affecting the Southeast Asian nations for days while moving south toward Australia.

  • Trump's Mar-a-Lago charged Secret Service almost $16,000 for $396 hotel rooms during presidential Christmas trip

    As president, Trump spent 142 days at his gilded Florida property, which he dubbed the "Winter White House."

  • On Iran nuclear deal, Biden faces more distrust in Tehran and sharpened knives in Washington

    President Biden's dilemma on the Iran nuclear deal: Go slow and risk war, or move fast even if it means an imperfect pact that hurts his domestic agenda.

  • Gorsuch, Alito balk as Supreme Court declines to hear case about workplace religious accommodations

    Companies are required to accommodate workers’ religious beliefs as long as it isn't an "undue hardship." Some justices want the court to define that.

  • Jerry Jones and the Dallas Cowboys might wind up getting exactly what they paid for

    There could be some concern that the team’s eight unrestricted free agents may be too much of a bargain at just a combined $12.712 million in 2021.