Amidst the daily fluctuations of the stock market, Utz Brands Inc (UTZ, Financial) recently experienced a 2.19% gain, though it has seen a 3-month loss of 11.68%. With an Earnings Per Share (EPS) sitting at $0.21, investors are contemplating whether the stock is modestly undervalued. This article embarks on a valuation analysis to determine the true worth of Utz Brands' shares, inviting readers to explore the financial nuances that underpin this snack food manufacturing giant's market position.
Company Introduction
Utz Brands Inc is renowned for its diverse portfolio of salty snacks, with brands like Utz, Zapp's, and Golden Flake leading the charge. The company's products, ranging from potato chips to veggie snacks, are distributed across various channels both domestically and internationally. With a current market capitalization of $1.10 billion and sales reaching $1.40 billion, Utz Brands operates with an operating margin of 1.59%. However, the stock's price of $13.54 stands below the GF Value of $17.68, suggesting a potential undervaluation. This juxtaposition sets the stage for an in-depth valuation analysis.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. Utz Brands (UTZ, Financial) is currently positioned as modestly undervalued according to this metric. The GF Value Line suggests a fair trading value, and when the stock price deviates significantly from this line, it indicates potential overvaluation or undervaluation. In the case of Utz Brands, the stock price below the GF Value Line hints at the likelihood of higher future returns relative to its business growth.
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Financial Strength Assessment
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Utz Brands has a cash-to-debt ratio of 0.06, ranking lower than 85.45% of its peers in the Consumer Packaged Goods industry. This figure leads GuruFocus to assign a financial strength rating of 3 out of 10, indicating a weak balance sheet that could pose risks to investors.
Profitability and Growth Prospects
Profitable companies, especially those with a track record of consistent earnings, generally present lower investment risks. Utz Brands has maintained profitability over the past decade, with an operating margin of 1.59% that ranks below more than half of its industry counterparts. GuruFocus ranks Utz Brands' profitability at 3 out of 10, reflecting subpar performance.
Growth is a pivotal factor in valuation, and Utz Brands' 3-year average annual revenue growth of 8.5% is commendable, surpassing over half of the industry. However, its EBITDA growth rate of -0.9% is less impressive, ranking lower than 62.1% of its peers. This mixed growth performance warrants careful consideration by investors.
ROIC vs. WACC Analysis
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability. Ideally, ROIC should exceed WACC. For Utz Brands, the current ROIC is -0.21, falling short of its WACC of 5.98, which may signal inefficiencies in generating cash flow relative to capital invested.
Conclusion
In summary, Utz Brands (UTZ, Financial) presents as modestly undervalued with a financial condition and profitability that raise concerns. Its growth trajectory is not leading the industry, which could influence its long-term stock performance. For those interested in a deeper financial exploration of Utz Brands, further details can be found in 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.
