Warrior Met Coal Inc (HCC, Financial) has recently shown a daily gain of 2.23%, alongside a significant 3-month gain of 28.58%. With an Earnings Per Share (EPS) of 8.66, investors are keen to understand if the stock is trading at a fair value. The question on many minds is whether Warrior Met Coal (HCC) is modestly overvalued, and this article aims to provide a comprehensive valuation analysis to address this query.
Company Introduction
Warrior Met Coal Inc is a prominent U.S.-based met coal producer and exporter, with two underground mines in Alabama. Catering to steel manufacturers across Europe, Asia, and South America, the company is a key player in the industry. Despite its robust operations, the current stock price of Warrior Met Coal (HCC, Financial) at $50.96 is in the spotlight when compared to the GF Value of $39.68, suggesting a potential overvaluation. This introduction serves as a prelude to a deeper analysis of the company's intrinsic value.
Summarize GF Value
The GF Value is a unique valuation tool that determines the intrinsic value of a stock based on historical trading multiples, an internal adjustment factor for past performance, and future business prospects. If the stock's price significantly exceeds the GF Value Line, it may indicate an overvaluation, potentially leading to lower future returns. Conversely, a price well below the line could signal undervaluation and the possibility of higher returns. For Warrior Met Coal (HCC, Financial), the current price suggests it is modestly overvalued.
Given this modest overvaluation, the long-term return of Warrior Met Coal's stock might trail behind its business growth, posing a vital consideration for investors.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Warrior Met Coal's cash-to-debt ratio of 3.94 outperforms 80.93% of its peers in the Steel industry, reflecting a strong balance sheet. GuruFocus rates the financial strength of Warrior Met Coal at 8 out of 10.
Profitability and Growth
Profitable companies, especially those with consistent long-term profitability, pose less risk for investors. Warrior Met Coal's impressive operating margin of 32.51% ranks it higher than 97.36% of its industry counterparts, underlining its strong profitability. Furthermore, the company has maintained profitability for 5 out of the past 10 years, with a revenue of $1.70 billion and an Earnings Per Share (EPS) of $8.66 over the past twelve months. GuruFocus ranks Warrior Met Coal's profitability at 7 out of 10.
Regarding growth, Warrior Met Coal's 3-year average annual revenue growth rate is 10.9%, which is average within the industry. However, its 3-year average EBITDA growth rate of 22.8% is more promising, positioning it better than 55.32% of its industry peers.
ROIC vs. WACC
An effective way to gauge a company's profitability is by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). Warrior Met Coal's ROIC of 37.88 is significantly higher than its WACC of 8.6, indicating that it is creating value for shareholders.
Conclusion
In summary, Warrior Met Coal (HCC, Financial) appears to be modestly overvalued. The company exhibits strong financial health and fair profitability, with growth rates that outpace over half of the companies in the Steel industry. For a more detailed understanding of Warrior Met Coal's financials, investors can explore 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.
