Despite a daily loss of 12.66% and a 3-month loss of 33.5%, Belden Inc (BDC, Financial) has an Earnings Per Share (EPS) (EPS) of 6.7. This article aims to answer the question: Is Belden Inc (BDC) stock modestly undervalued? Our valuation analysis will provide you with a comprehensive understanding of the company's financial health and future prospects. We invite you to read on for a deeper understanding of Belden's value.
Company Introduction
Belden Inc provides signal transmission products to distributors, end-users, installers, and original equipment manufacturers. The company operates in two segments - Enterprise Solutions and Industrial Solutions. The Enterprise Solutions segment is a provider in network infrastructure solutions, as well as cabling and connectivity solutions for commercial audio/video and security applications. The Industrial Solutions segment is a provider of high-performance networking components and machine connectivity products.
As of November 02, 2023, Belden Inc (BDC, Financial) is trading at $62.73, while its fair value (GF Value) stands at $75.05. This discrepancy between the stock price and the GF Value suggests that Belden might be modestly undervalued. This article will offer a detailed analysis of Belden's financial performance and future prospects, integrating essential company details with financial assessment.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical multiples at which the stock has traded, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. The GF Value Line, displayed on our summary page, provides an overview of the fair trading value of the stock.
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. Currently, Belden (BDC, Financial) is believed to be modestly undervalued with a market cap of $2.70 billion.
Given that Belden is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, it is crucial to review a company's financial strength before investing in its stock. A good starting point is to examine the cash-to-debt ratio and interest coverage. Belden's cash-to-debt ratio stands at 0.41, which is lower than 77.1% of 2371 companies in the Hardware industry. GuruFocus ranks Belden's overall financial strength at 6 out of 10, indicating fair financial health.
Profitability and Growth
It is less risky to invest in profitable companies, especially those with consistent profitability over the long term. A company with high profit margins is usually a safer investment than those with low profit margins. Belden has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $2.70 billion and an EPS of $6.7. Its operating margin is 13.07%, which ranks better than 83.16% of 2452 companies in the Hardware industry. Overall, Belden's profitability is ranked 7 out of 10, indicating fair profitability.
Growth is one of the most crucial factors in the valuation of a company. Long-term stock performance is closely correlated with growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Belden is 5.2%, which ranks better than 52.38% of 2329 companies in the Hardware industry. However, the 3-year average EBITDA growth is 7.2%, which ranks worse than 56.46% of 1957 companies in the Hardware industry.
Another way to gauge a company's profitability is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Belden's ROIC is 15.06, and its cost of capital is 9.44.
Conclusion
Overall, Belden (BDC, Financial) stock is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. However, its growth ranks worse than 56.46% of 1957 companies in the Hardware industry. For a more detailed understanding of Belden 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.
