The stock of Hamilton Beach Brands Holding Co (NYSE:HBB, 30-year Financials) shows every sign of being 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 $17.85 per share and the market cap of $247.4 million, Hamilton Beach Brands Holding Co stock is believed to be modestly undervalued. GF Value for Hamilton Beach Brands Holding Co is shown in the chart below.
Because Hamilton Beach Brands Holding Co is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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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. Hamilton Beach Brands Holding Co has a cash-to-debt ratio of 0.03, which is in the bottom 10% of the companies in Hardware industry. The overall financial strength of Hamilton Beach Brands Holding Co is 5 out of 10, which indicates that the financial strength of Hamilton Beach Brands Holding Co is fair. This is the debt and cash of Hamilton Beach Brands Holding Co 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. Hamilton Beach Brands Holding Co has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $603.7 million and earnings of $3.37 a share. Its operating margin is 6.20%, which ranks in the middle range of the companies in Hardware industry. Overall, GuruFocus ranks the profitability of Hamilton Beach Brands Holding Co at 5 out of 10, which indicates fair profitability. This is the revenue and net income of Hamilton Beach Brands Holding Co 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 performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Hamilton Beach Brands Holding Co is -0.5%, which ranks in the middle range of the companies in Hardware industry. The 3-year average EBITDA growth rate is -2%, which ranks in the middle range of the companies in Hardware industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Hamilton Beach Brands Holding Co's return on invested capital is 15.40, and its cost of capital is 6.88. The historical ROIC vs WACC comparison of Hamilton Beach Brands Holding Co is shown below:
In short, the stock of Hamilton Beach Brands Holding Co (NYSE:HBB, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range of the companies in Hardware industry. To learn more about Hamilton Beach Brands Holding Co stock, you can check out its 30-year Financials here.
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