Global Industrial Co (GIC, Financial) has recently seen a daily gain of 10.17%, and a 3-month gain of 22.77%. With an Earnings Per Share (EPS) of 1.8, it begs the question: Is the stock fairly valued? This article will delve into the valuation analysis of GIC, providing an in-depth look into the company's financials and operations.
Company Overview
Global Industrial Co is a value-added industrial distributor, providing a wide range of industrial and maintenance, repair, and operations (MRO) products to customers across North America. The company's offerings include storage and shelving, safety and security products, carts and trucks, HVAC and fans, furniture and decor, material handling, janitorial and facility maintenance, workbenches and shop desks, tools and instruments, plumbing and pumps, office and school supplies, packaging and shipping, lighting and electrical, food service and retail, medical and laboratory, motors and power transmission, building supplies, machining, fasteners and hardware, vehicle maintenance, and raw materials. The stock price and the GF Value, an estimation of fair value, will be compared to provide a deeper understanding of the company's value.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's ideal fair trading value. 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.
Global Industrial Co (GIC, Financial) stock appears to be fairly valued based on the GuruFocus Value calculation. With its current price of $35.2 per share, Global Industrial Co has a market cap of $1.30 billion. As the stock is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Global Industrial Co has a cash-to-debt ratio of 0.32, which ranks worse than 55.94% of 143 companies in the Industrial Distribution industry. Based on this, GuruFocus ranks Global Industrial Co's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Global Industrial Co has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $1.20 billion and Earnings Per Share (EPS) of $1.8. Its operating margin is 7.95%, which ranks better than 67.12% of 146 companies in the Industrial Distribution industry. Overall, the profitability of Global Industrial Co is ranked 7 out of 10, which indicates fair profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Global Industrial Co is 6.8%, which ranks worse than 51.77% of 141 companies in the Industrial Distribution industry. The 3-year average EBITDA growth rate is 15.3%, which ranks worse than 51.59% of 126 companies in the Industrial Distribution industry.
ROIC vs WACC
Another way to assess 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, Global Industrial Co's return on invested capital is 23.15, and its cost of capital is 8.74.
Conclusion
In conclusion, the stock of Global Industrial Co (GIC, Financial) shows every sign of being fairly valued. The company's financial condition is strong and its profitability is fair. Its growth ranks worse than 51.59% of 126 companies in the Industrial Distribution industry. To learn more about Global Industrial Co 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.
