Utz Brands Inc (UTZ, Financial) recently witnessed a daily loss of -2.89%, adding up to a 3-month loss of -13.22%. The company reported Earnings Per Share (EPS) of 0.01. This raises an important question: is the stock modestly undervalued? In this analysis, we delve into the company's financials and valuation to provide an informed answer. We invite you to read on for a comprehensive understanding of Utz Brands' intrinsic value.
Introducing Utz Brands Inc
Utz Brands Inc is a leading snack food manufacturing company. The company is known for its diverse portfolio of salty snacks sold under popular brands, including Utz, Zapp's, Golden Flake, Good Health, Boulder Canyon, Hawaiian, TORTIYAHS!, and more. Utz Brands' products, which include potato chips, pretzels, cheese snacks, pork skins, pub/party mixes, and veggie snacks, are distributed nationally and internationally through various channels. The company's current stock price stands at $13.76, while the GF Value, an estimate of fair value, is $18.02.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on our analysis, Utz Brands (UTZ, Financial) appears to be modestly undervalued. The stock's fair value, as estimated by GF Value, is based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $13.76 per share, Utz Brands stock is believed to be modestly undervalued.
Given that Utz Brands is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Assessing Utz Brands' Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to thoroughly research and review a company's financial strength before purchasing shares. Measures like the cash-to-debt ratio and interest coverage can provide valuable insights into its financial strength. Utz Brands has a cash-to-debt ratio of 0.07, ranking worse than 82.66% of 1799 companies in the Consumer Packaged Goods industry. The overall financial strength of Utz Brands is 4 out of 10, indicating that the financial strength of Utz Brands is poor.
Examining Profitability and Growth
Investing in profitable companies carries less risk, especially those 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. Utz Brands has been profitable for 1 year over the past 10 years. During the past 12 months, the company had revenues of $1.40 billion and Earnings Per Share (EPS) of $0.01. Its operating margin of 1.74% is worse than 66.49% of 1844 companies in the Consumer Packaged Goods industry. Overall, GuruFocus ranks Utz Brands's profitability as poor.
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 Utz Brands is 8.5%, which ranks better than 56.64% of 1718 companies in the Consumer Packaged Goods industry. The 3-year average EBITDA growth rate is -0.9%, which ranks worse than 62.15% of 1527 companies in the Consumer Packaged Goods industry.
ROIC vs WACC Analysis
Another way to assess the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of 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, Utz Brands's return on invested capital is 0.21, and its cost of capital is 6.93.
Conclusion
Overall, Utz Brands (UTZ, Financial) stock is believed to be modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks worse than 62.15% of 1527 companies in the Consumer Packaged Goods industry. To learn more about Utz Brands stock, you can check out its 30-Year Financials here.
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