Medical Facilities Stock Is Believed To Be Fairly Valued
- By GF Value
The stock of Medical Facilities (OTCPK:MFCSF, 30-year Financials) gives every indication of being 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 $6.1875 per share and the market cap of $185.5 million, Medical Facilities stock shows every sign of being fairly valued. GF Value for Medical Facilities is shown in the chart below.
Because Medical Facilities is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 4% over the past 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. Medical Facilities has a cash-to-debt ratio of 0.40, which is in the middle range of the companies in the industry of Healthcare Providers & Services. The overall financial strength of Medical Facilities is 4 out of 10, which indicates that the financial strength of Medical Facilities is poor. This is the debt and cash of Medical Facilities 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. Medical Facilities has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $365.1 million and earnings of $0.12 a share. Its operating margin is 20.62%, which ranks better than 90% of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of Medical Facilities is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Medical Facilities 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 Medical Facilities is 4%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. The 3-year average EBITDA growth rate is 1.5%, which ranks worse than 66% of the companies in the industry of Healthcare Providers & Services.
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, Medical Facilities's return on invested capital is 17.48, and its cost of capital is 6.68. The historical ROIC vs WACC comparison of Medical Facilities is shown below:
Overall, the stock of Medical Facilities (OTCPK:MFCSF, 30-year Financials) is believed to be fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 66% of the companies in the industry of Healthcare Providers & Services. To learn more about Medical Facilities stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
