ZTO Express (Cayman) Inc (ZTO, Financial) has recently experienced a daily loss of 6.2%, contributing to a three-month decline of 9.66%. Despite these figures, the company's Earnings Per Share (EPS) stand at an impressive $1.44. This analysis seeks to address a pressing question among investors: Is ZTO Express (Cayman) significantly undervalued? The following valuation analysis aims to provide clarity and insight into ZTO Express (Cayman)'s current market position.
Company Introduction
ZTO Express (Cayman) Inc is a leading logistics service provider, specializing in express delivery and encompassing a variety of related sectors, including cross-border logistics, commercial services, cloud warehousing, aviation, finance, and more. With a current stock price of $22.55 and a Fair Value (GF Value) estimated at $32.93, ZTO Express (Cayman) appears to be significantly undervalued. This discrepancy sets the stage for an in-depth examination of the intrinsic value of the company, marrying financial analysis with essential business insights.
Summarize GF Value
The GF Value is a unique metric that determines the intrinsic value of a stock. It incorporates historical trading multiples, an adjustment factor reflecting the company's past performance, and future business expectations. The GF Value Line suggests the ideal fair value at which the stock should trade. If a stock's price is well above this line, it may be overvalued, leading to potentially poor future returns. Conversely, if it is below, the stock might be undervalued, indicating the possibility of higher future returns.
ZTO Express (Cayman) Inc (ZTO, Financial) is currently trading at a market cap of $18.40 billion, which is significantly lower than the GF Value estimation. This signals that the stock is undervalued, and thus, it may offer a substantial return over the long term, outpacing its business growth.
Financial Strength
Investors must scrutinize a company's financial strength to avoid potential capital loss. ZTO Express (Cayman)'s cash-to-debt ratio of 1.08 positions it favorably within the Transportation industry, indicating a strong balance sheet. GuruFocus awards ZTO Express (Cayman) a financial strength rating of 8 out of 10.
Profitability and Growth
Consistent profitability is a hallmark of a lower-risk investment. ZTO Express (Cayman) has shown profitability for 9 out of the past 10 years, with a robust operating margin of 25.17%, outperforming 85.64% of its peers in the Transportation industry. This leads to a profitability rank of 9 out of 10.
When it comes to growth, ZTO Express (Cayman)'s average annual revenue growth of 15.5% surpasses 73.42% of industry competitors. Furthermore, its 3-year average EBITDA growth rate of 10.2% is also notable, ranking higher than 53.54% of similar companies.
ROIC vs WACC
An effective measure of a company's profitability is the comparison between its Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). ZTO Express (Cayman)'s ROIC is a healthy 11.29, significantly exceeding its WACC of 3.16, indicating efficient capital utilization.
Conclusion
In summary, ZTO Express (Cayman) Inc (ZTO, Financial) is significantly undervalued according to our analysis. The company boasts a strong financial foundation, impressive profitability, and commendable growth. These attributes suggest a promising future for investors. To delve deeper into ZTO Express (Cayman)'s financials, you 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.
