Malibu Boats Stock Is Estimated To Be Significantly Undervalued
- By GF Value
The stock of Malibu Boats (NAS:MBUU, 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 $75.53 per share and the market cap of $1.6 billion, Malibu Boats stock is believed to be significantly undervalued. GF Value for Malibu Boats is shown in the chart below.
Because Malibu Boats is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth, which averaged 25.9% over the past five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Malibu Boats has a cash-to-debt ratio of 0.26, which which ranks worse than 71% of the companies in Vehicles & Parts industry. The overall financial strength of Malibu Boats is 6 out of 10, which indicates that the financial strength of Malibu Boats is fair. This is the debt and cash of Malibu Boats 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. Malibu Boats has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $768.5 million and earnings of $3.92 a share. Its operating margin is 14.79%, which ranks better than 89% of the companies in Vehicles & Parts industry. Overall, the profitability of Malibu Boats is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Malibu Boats 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 performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Malibu Boats is 25.9%, which ranks better than 95% of the companies in Vehicles & Parts industry. The 3-year average EBITDA growth rate is 17%, which ranks better than 84% of the companies in Vehicles & Parts 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, Malibu Boats's return on invested capital is 18.92, and its cost of capital is 12.28. The historical ROIC vs WACC comparison of Malibu Boats is shown below:
In conclusion, the stock of Malibu Boats (NAS:MBUU, 30-year Financials) gives every indication of being significantly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 84% of the companies in Vehicles & Parts industry. To learn more about Malibu Boats stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
