Surya Citra Media Tbk Stock Gives Every Indication Of Being Fairly Valued
- By GF Value
The stock of Surya Citra Media Tbk (ISX:SCMA, 30-year Financials) is believed to be 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 IDR 1645 per share and the market cap of IDR 21309.7 billion, Surya Citra Media Tbk stock gives every indication of being fairly valued. GF Value for Surya Citra Media Tbk is shown in the chart below.
Because Surya Citra Media Tbk is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 5.7% over the past three years and is estimated to grow 3.73% annually over the next three to 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. Surya Citra Media Tbk has a cash-to-debt ratio of 0.92, which which ranks in the middle range of the companies in the industry of Media - Diversified. The overall financial strength of Surya Citra Media Tbk is 7 out of 10, which indicates that the financial strength of Surya Citra Media Tbk is fair. This is the debt and cash of Surya Citra Media Tbk over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Surya Citra Media Tbk has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of IDR 5200.5 billion and earnings of IDR 86.05 a share. Its operating margin is 28.36%, which ranks better than 93% of the companies in the industry of Media - Diversified. Overall, GuruFocus ranks the profitability of Surya Citra Media Tbk at 8 out of 10, which indicates strong profitability. This is the revenue and net income of Surya Citra Media Tbk over the past years:
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 Surya Citra Media Tbk is 5.7%, which ranks better than 71% of the companies in the industry of Media - Diversified. The 3-year average EBITDA growth is -3.9%, which ranks in the middle range of the companies in the industry of Media - Diversified.
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, Surya Citra Media Tbk's return on invested capital is 21.61, and its cost of capital is 13.21. The historical ROIC vs WACC comparison of Surya Citra Media Tbk is shown below:
In closing, Surya Citra Media Tbk (ISX:SCMA, 30-year Financials) stock is estimated to be fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks in the middle range of the companies in the industry of Media - Diversified. To learn more about Surya Citra Media Tbk stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
