The stock of CONSOL Energy (NYSE:CEIX, 30-year Financials) gives every indication of being significantly overvalued, 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 $13.17 per share and the market cap of $453.6 million, CONSOL Energy stock is believed to be significantly overvalued. GF Value for CONSOL Energy is shown in the chart below.
Because CONSOL Energy is significantly overvalued, the long-term return of its stock is likely to be much lower than its future 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 0.13, which which ranks worse than 83% of the companies in the industry of Other Energy Sources. The overall financial strength of CONSOL Energy is 3 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:
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. CONSOL Energy has been profitable 6 years over the past 10 years. During the past 12 months, the company had revenues of $935.1 million and earnings of $0.27 a share. Its operating margin of -6.83% worse than 72% of the companies in the industry of Other Energy Sources. Overall, GuruFocus ranks CONSOL Energy's profitability as fair. 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 76% of the companies in the industry of Other Energy Sources. The 3-year average EBITDA growth is -8.3%, which ranks worse than 68% of the companies in the industry of Other Energy Sources.
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, CONSOL Energy's ROIC is -1.57 while its WACC came in at 13.43. The historical ROIC vs WACC comparison of CONSOL Energy is shown below:
In closing, the stock of CONSOL Energy (NYSE:CEIX, 30-year Financials) shows every sign of being significantly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 68% 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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