The stock of Crane Co (NYSE:CR, 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 $93.27 per share and the market cap of $5.4 billion, Crane Co stock is believed to be modestly overvalued. GF Value for Crane Co is shown in the chart below.
Because Crane Co is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 2.7% over the past three years and is estimated to grow 0.25% 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. Crane Co has a cash-to-debt ratio of 0.42, which is worse than 71% of the companies in Industrial Products industry. The overall financial strength of Crane Co is 5 out of 10, which indicates that the financial strength of Crane Co is fair. This is the debt and cash of Crane Co over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Crane Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $2.9 billion and earnings of $3.07 a share. Its operating margin is 10.49%, which ranks better than 71% of the companies in Industrial Products industry. Overall, the profitability of Crane Co is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Crane 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 Crane Co is 2.7%, which ranks in the middle range of the companies in Industrial Products industry. The 3-year average EBITDA growth is -4.2%, which ranks worse than 67% of the companies in Industrial Products industry.
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, Crane Co's ROIC is 6.66 while its WACC came in at 10.68. The historical ROIC vs WACC comparison of Crane Co is shown below:
In summary, Crane Co (NYSE:CR, 30-year Financials) stock gives every indication of being modestly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks worse than 67% of the companies in Industrial Products industry. To learn more about Crane Co 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.
