The stock of Sunny Optical Technology (Group) Co (OTCPK:SNPTF, 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 $22.48 per share and the market cap of $24 billion, Sunny Optical Technology (Group) Co stock appears to be fairly valued. GF Value for Sunny Optical Technology (Group) Co is shown in the chart below.
Because Sunny Optical Technology (Group) Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 19.3% over the past three years and is estimated to grow 12.80% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
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. Sunny Optical Technology (Group) Co has a cash-to-debt ratio of 1.90, which is in the middle range of the companies in Hardware industry. GuruFocus ranks the overall financial strength of Sunny Optical Technology (Group) Co at 7 out of 10, which indicates that the financial strength of Sunny Optical Technology (Group) Co is fair. This is the debt and cash of Sunny Optical Technology (Group) Co over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Sunny Optical Technology (Group) Co has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $5.6 billion and earnings of $0.662 a share. Its operating margin of 14.19% better than 85% of the companies in Hardware industry. Overall, GuruFocus ranks Sunny Optical Technology (Group) Co's profitability as strong. This is the revenue and net income of Sunny Optical Technology (Group) 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 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 Sunny Optical Technology (Group) Co is 19.3%, which ranks better than 90% of the companies in Hardware industry. The 3-year average EBITDA growth rate is 24.3%, which ranks better than 78% 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, Sunny Optical Technology (Group) Co's return on invested capital is 36.19, and its cost of capital is 11.11. The historical ROIC vs WACC comparison of Sunny Optical Technology (Group) Co is shown below:
To conclude, the stock of Sunny Optical Technology (Group) Co (OTCPK:SNPTF, 30-year Financials) is believed to be fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 78% of the companies in Hardware industry. To learn more about Sunny Optical Technology (Group) Co stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
