The stock of Sibanye Stillwater (NYSE:SBSW, 30-year Financials) is believed to be modestly 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 $17.86 per share and the market cap of $13.1 billion, Sibanye Stillwater stock appears to be modestly undervalued. GF Value for Sibanye Stillwater is shown in the chart below.
Because Sibanye Stillwater is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 26.2% over the past five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Sibanye Stillwater has a cash-to-debt ratio of 1.08, which ranks worse than 70% of the companies in Metals & Mining industry. Based on this, GuruFocus ranks Sibanye Stillwater's financial strength as 6 out of 10, suggesting fair balance sheet. This is the debt and cash of Sibanye Stillwater 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. Sibanye Stillwater has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $34 billion and earnings of $11.06 a share. Its operating margin is 31.82%, which ranks better than 87% of the companies in Metals & Mining industry. Overall, the profitability of Sibanye Stillwater is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Sibanye Stillwater over the past years:
Growth is probably one of the most important factors 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. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Sibanye Stillwater's 3-year average revenue growth rate is better than 88% of the companies in Metals & Mining industry. Sibanye Stillwater's 3-year average EBITDA growth rate is 243.1%, which ranks better than 100% of the companies in Metals & Mining industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted 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 ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Sibanye Stillwater's ROIC was 38.15, while its WACC came in at 9.93. The historical ROIC vs WACC comparison of Sibanye Stillwater is shown below:
Overall, The stock of Sibanye Stillwater (NYSE:SBSW, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 100% of the companies in Metals & Mining industry. To learn more about Sibanye Stillwater stock, you can check out its 30-year Financials here.
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