The stock of Top Glove Bhd (OTCPK:TGLVY, 30-year Financials) appears 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 $5.1 per share and the market cap of $10.2 billion, Top Glove Bhd stock is estimated to be modestly undervalued. GF Value for Top Glove Bhd is shown in the chart below.
Because Top Glove Bhd is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 25.9% 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. Top Glove Bhd has a cash-to-debt ratio of 9.23, which is better than 67% of the companies in the industry of Medical Devices & Instruments. The overall financial strength of Top Glove Bhd is 8 out of 10, which indicates that the financial strength of Top Glove Bhd is strong. This is the debt and cash of Top Glove Bhd 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. Top Glove Bhd has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $3.6 billion and earnings of $0.792 a share. Its operating margin is 58.18%, which ranks better than 99% of the companies in the industry of Medical Devices & Instruments. Overall, GuruFocus ranks the profitability of Top Glove Bhd at 9 out of 10, which indicates strong profitability. This is the revenue and net income of Top Glove Bhd 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 Top Glove Bhd is 25.9%, which ranks better than 85% of the companies in the industry of Medical Devices & Instruments. The 3-year average EBITDA growth rate is 66.6%, which ranks better than 93% of the companies in the industry of Medical Devices & Instruments.
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, Top Glove Bhd's ROIC was 117.63, while its WACC came in at 5.83. The historical ROIC vs WACC comparison of Top Glove Bhd is shown below:
In summary, the stock of Top Glove Bhd (OTCPK:TGLVY, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 93% of the companies in the industry of Medical Devices & Instruments. To learn more about Top Glove Bhd stock, you can check out its 30-year Financials here.
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