The stock of CONSOL Energy (NYSE:CEIX, 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 $9.214 per share and the market cap of $316.6 million, CONSOL Energy stock shows every sign of being modestly undervalued. GF Value for CONSOL Energy is shown in the chart below.
Because CONSOL Energy is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. CONSOL Energy has a cash-to-debt ratio of 0.07, which which ranks worse than 89% of the companies in the industry of Other Energy Sources. The overall financial strength of CONSOL Energy is 2 out of 10, which indicates that the financial strength of CONSOL Energy is poor. This is the debt and cash of CONSOL Energy 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. CONSOL Energy has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $879.5 million and loss of $0.39 a share. Its operating margin is -12.69%, which ranks worse than 80% of the companies in the industry of Other Energy Sources. Overall, the profitability of CONSOL Energy is ranked 4 out of 10, which indicates poor profitability. This is the revenue and net income of CONSOL Energy 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 CONSOL Energy is -10.4%, which ranks worse than 77% of the companies in the industry of Other Energy Sources. The 3-year average EBITDA growth is -8.3%, which ranks worse than 72% of the companies in the industry of Other Energy Sources.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, CONSOL Energy's return on invested capital is -6.47, and its cost of capital is 12.93. The historical ROIC vs WACC comparison of CONSOL Energy is shown below:
In closing, CONSOL Energy (NYSE:CEIX, 30-year Financials) stock is believed to be modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks worse than 72% of the companies in the industry of Other Energy Sources. To learn more about CONSOL Energy stock, you can check out its 30-year Financials here.
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