The stock of Top Glove Bhd (OTCPK:TGLVY, 30-year Financials) appears to be significantly 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 $4.88 per share and the market cap of $9.8 billion, Top Glove Bhd stock is believed to be significantly undervalued. GF Value for Top Glove Bhd is shown in the chart below.
Because Top Glove Bhd is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth, which averaged 25.9% over the past five years.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Top Glove Bhd has a cash-to-debt ratio of 9.23, which is better than 66% of the companies in the industry of Medical Devices & Instruments. GuruFocus ranks the overall financial strength of Top Glove Bhd at 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 is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those 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, the profitability of Top Glove Bhd is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Top Glove Bhd 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 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 is 66.6%, which ranks better than 91% of the companies in the industry of Medical Devices & Instruments.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Top Glove Bhd's ROIC is 117.63 while its WACC came in at 5.84. The historical ROIC vs WACC comparison of Top Glove Bhd is shown below:
To conclude, the stock of Top Glove Bhd (OTCPK:TGLVY, 30-year Financials) appears to be significantly undervalued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 91% 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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