Utz Brands Inc (UTZ, Financial) has recently experienced a daily loss of 5.17% and a 3-month loss of 16.74%. With an Earnings Per Share (EPS) (EPS) of 0.01, the question arises: is the stock modestly undervalued? This article delves into the financial health and intrinsic value of Utz Brands, providing a detailed analysis of its valuation and financial strength.
Company Overview
Utz Brands Inc is a leading snack food manufacturing company. The company offers a diverse portfolio of salty snacks under popular brands such as Utz, Zapp's, Golden Flake, Good Health, Boulder Canyon, Hawaiian, TORTIYAHS!, and more. Its products, which include potato chips, pretzels, cheese snacks, pork skins, pub/party mixes, and veggie snacks, are distributed nationally and internationally through various channels including grocery, mass merchant, club, convenience, and drug stores. The company operates with a market cap of $1.10 billion and sales of $1.40 billion.
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 trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future estimates of the business performance. The GF Value Line 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 is likely to be higher.
Currently, Utz Brands (UTZ, Financial) is estimated to be modestly undervalued based on the GuruFocus Value calculation. With a current price of $13.56 per share, the stock is poised to offer higher long-term returns given its current undervalued status.
Financial Strength Analysis
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Hence, it is crucial to carefully review the financial strength of a company before deciding to buy its stock. The cash-to-debt ratio and interest coverage are great starting points for understanding a company's financial strength. Utz Brands has a cash-to-debt ratio of 0.07, which is worse than 82.58% of 1797 companies in the Consumer Packaged Goods industry. This indicates that the financial strength of Utz Brands is poor.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Utz Brands has been profitable over the past 10 years. However, its operating margin of 1.74% ranks worse than 66.61% of 1842 companies in the Consumer Packaged Goods industry, indicating poor profitability.
Growth is a critical factor in the valuation of a company. Utz Brands's 3-year average revenue growth rate is better than 56.49% of 1717 companies in the Consumer Packaged Goods industry. However, its 3-year average EBITDA growth rate is -0.9%, which ranks worse than 62.18% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way to determine its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Utz Brands's ROIC is 0.21, and its cost of capital is 6.91.
Conclusion
In conclusion, the stock of Utz Brands (UTZ, Financial) is estimated to be modestly undervalued. However, the company's financial condition and profitability are poor, and its growth ranks worse than 62.18% of companies in the Consumer Packaged Goods industry. To learn more about Utz Brands stock, you can check out its 30-Year Financials here.
To find out high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.
