Despite a daily gain of 5.2%, Tronox Holdings PLC (TROX, Financial) has experienced a 3-month loss of 12.11% and reports a Loss Per Share of $1.75. Investors are presented with the vital question: Is the stock modestly undervalued? This article delves into a comprehensive valuation analysis to explore this query and invites readers to consider the following insights.
Company Introduction
Tronox Holdings PLC is a leading vertically integrated manufacturer of TiO2 pigment with operations spanning across continents. Its core business involves mining titanium-bearing minerals and processing them into TiO2 for a variety of applications such as paints, coatings, plastics, paper, and printing ink. With a current stock price of $11.73 and a GF Value of $13.96, Tronox Holdings PLC's market cap stands at $1.80 billion, suggesting a potential undervaluation that merits further investigation.
Summarize GF Value
The GF Value is a unique measure that represents the intrinsic value of a stock. It is calculated by considering historical trading multiples, a GuruFocus adjustment factor based on past performance, and future business performance estimates. According to this measure, Tronox Holdings PLC appears to be modestly undervalued. The stock's current price is below the GF Value Line, suggesting that its future return potential may be higher than what its current market price indicates.
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Financial Strength
Investors must consider a company's financial strength to mitigate the risk of capital loss. Tronox Holdings PLC's cash-to-debt ratio of 0.08 ranks lower than most of its peers in the Chemicals industry, reflecting a weaker financial position. With a financial strength rating of 4 out of 10, the company's ability to manage debt is not as robust as some investors might prefer.
Profitability and Growth
Profitable companies with consistent performance are generally safer investment choices. Tronox Holdings PLC has maintained profitability in 3 out of the past 10 years. With an operating margin of 7.61%, it ranks fairly within its industry. The company's profitability rank is 6 out of 10, indicating a decent level of profitability.
The growth of a company is integral to its valuation. Tronox Holdings PLC's 3-year average annual revenue growth rate is 5.2%, which is not leading within the industry, but its EBITDA growth rate of 17.1% is more competitive, suggesting a potential for creating shareholder value.
ROIC vs WACC
A key profitability metric is the comparison between a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). Ideally, a company's ROIC should exceed its WACC to indicate it is creating value. Tronox Holdings PLC's ROIC of -17.22 is currently below its WACC of 4.74, suggesting it is not generating sufficient returns on its investments.
Conclusion
In summary, Tronox Holdings PLC's stock appears to be modestly undervalued. While the company's financial strength is not ideal, its profitability and growth rates offer some positives. The stock's valuation, when considering the GF Value, indicates that there may be room for an increase in its market price. To gain a deeper understanding of Tronox Holdings PLC's financials, investors can review 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.
