- By GF Value
The stock of Core-Mark Holding Co (NAS:CORE, 30-year Financials) is estimated to be modestly 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 $38.88 per share and the market cap of $1.8 billion, Core-Mark Holding Co stock is estimated to be modestly overvalued. GF Value for Core-Mark Holding Co is shown in the chart below.
Warning! GuruFocus has detected 7 Warning Signs with CORE. Click here to check it out.
CORE 15-Year Financial Data
The intrinsic value of CORE
Peter Lynch Chart of CORE
Because Core-Mark Holding Co is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 3.4% over the past five years.
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. Core-Mark Holding Co has a cash-to-debt ratio of 0.04, which is in the bottom 10% of the companies in the industry of Retail - Defensive. The overall financial strength of Core-Mark Holding Co is 6 out of 10, which indicates that the financial strength of Core-Mark Holding Co is fair. This is the debt and cash of Core-Mark Holding Co 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. Core-Mark Holding Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $17 billion and earnings of $1.4 a share. Its operating margin is 0.56%, which ranks worse than 73% of the companies in the industry of Retail - Defensive. Overall, the profitability of Core-Mark Holding Co is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Core-Mark Holding Co 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 Core-Mark Holding Co is 3.4%, which ranks in the middle range of the companies in the industry of Retail - Defensive. The 3-year average EBITDA growth is 14.5%, which ranks in the middle range of the companies in the industry of Retail - Defensive.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). 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. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Core-Mark Holding Co's ROIC is 5.78 while its WACC came in at 3.26. The historical ROIC vs WACC comparison of Core-Mark Holding Co is shown below:
To conclude, The stock of Core-Mark Holding Co (NAS:CORE, 30-year Financials) shows every sign of being modestly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range of the companies in the industry of Retail - Defensive. To learn more about Core-Mark Holding Co stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.