The stock of Capital Properties (OTCPK:CPTP, 30-year Financials) is believed to be fairly valued, 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 $12.25 per share and the market cap of $80.8 million, Capital Properties stock shows every sign of being fairly valued. GF Value for Capital Properties is shown in the chart below.
Because Capital Properties is fairly valued, the long-term return of its stock is likely to be close to the rate of 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. Capital Properties has a cash-to-debt ratio of 10000.00, which is better than 100% of the companies in Real Estate industry. The overall financial strength of Capital Properties is 9 out of 10, which indicates that the financial strength of Capital Properties is strong. This is the debt and cash of Capital Properties 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. Capital Properties has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4.6 million and earnings of $0.3 a share. Its operating margin is 59.08%, which ranks better than 90% of the companies in Real Estate industry. Overall, GuruFocus ranks the profitability of Capital Properties at 7 out of 10, which indicates fair profitability. This is the revenue and net income of Capital Properties 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 Capital Properties is -4.2%, which ranks in the middle range of the companies in Real Estate industry. The 3-year average EBITDA growth rate is 14.5%, which ranks better than 68% of the companies in Real Estate industry.
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, Capital Properties's return on invested capital is 28.09, and its cost of capital is 1.35. The historical ROIC vs WACC comparison of Capital Properties is shown below:
In summary, Capital Properties (OTCPK:CPTP, 30-year Financials) stock shows every sign of being fairly valued. The company's financial condition is strong and its profitability is fair. Its growth ranks better than 68% of the companies in Real Estate industry. To learn more about Capital Properties stock, you can check out its 30-year Financials here.
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