XPEL Inc (XPEL, Financial) experienced a 1.7% daily gain, despite a 3-month loss of -38.64 %. The company's Earnings Per Share (EPS) (EPS) stands at 1.76. The question that arises is whether the stock is significantly undervalued. In this article, we will delve into a valuation analysis of XPEL, a provider of protective films and coatings. We invite you to read on as we uncover the intrinsic value of this company.
Company Introduction
XPEL Inc (XPEL, Financial) is a leading provider of protective films and coatings, including automotive paint protection film, surface protection film, automotive and commercial/residential window films, and ceramic coatings. The company leverages a network of trained installers and proprietary DAP software to exceed customer expectations by providing quality products, exceptional customer service, technical support, and world-class training. As of October 20, 2023, XPEL's stock price stands at $51.51, with a market cap of $1.40 billion. The GF Value, an estimation of fair value, is pegged at $90.15, suggesting that the stock may be significantly undervalued.
Understanding the GF Value
The GF Value is a proprietary metric that represents the current intrinsic value of a stock. It is derived from historical multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. 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 considered 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 GuruFocus' valuation method, XPEL appears to be significantly undervalued. The stock's fair value is estimated using three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $51.51 per share, XPEL's market cap stands at $1.40 billion, which suggests that the stock is significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. A good starting point is to look at the cash-to-debt ratio and interest coverage. XPEL has a cash-to-debt ratio of 0.49, which ranks worse than 54.35% of 1229 companies in the Vehicles & Parts industry. Based on this, GuruFocus ranks XPEL's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. XPEL has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $356.30 million and Earnings Per Share (EPS) of $1.76. Its operating margin is 17.76%, which ranks better than 94.46% of 1264 companies in the Vehicles & Parts industry. Overall, the profitability of XPEL is ranked 10 out of 10, indicating strong profitability.
Growth is probably the most important factor in the valuation 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 XPEL is 35.6%, which ranks better than 93.44% of 1204 companies in the Vehicles & Parts industry. The 3-year average EBITDA growth rate is 48.3%, which ranks better than 90.45% of 1079 companies in the Vehicles & Parts industry.
ROIC vs WACC
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, XPEL's ROIC is 30.63 while its WACC came in at 15.15.
Conclusion
In conclusion, the stock of XPEL (XPEL, Financial) appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 90.45% of 1079 companies in the Vehicles & Parts industry. To learn more about XPEL stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
