ZTO Express (Cayman) Inc (ZTO, Financial) has been navigating through market fluctuations with a recent daily loss of -2.95% and a 3-month decline of -15.85%. Despite these movements and an Earnings Per Share (EPS) of $1.49, investors are keen to understand if the stock is significantly undervalued. This article aims to provide a valuation analysis that will clarify the current market position of ZTO Express (Cayman) Inc (ZTO) and its potential for future growth.
Company Introduction
ZTO Express (Cayman) Inc (ZTO, Financial) stands as China's largest express delivery company by parcel volume, boasting a 22.1% volume share in 2022. Founded in 2002 and headquartered in Shanghai, ZTO Express (Cayman) operates a unique network partner model, providing line-haul transportation and sorting services, while its partners manage first-mile pickup and last-mile delivery. With the backing of Alibaba Group and the leadership of founder Meisong Lai, the company's valuation compared to its GF Value of $29.15 suggests a significant undervaluation, inviting a deeper look into its financial strength and growth prospects.
Summarize GF Value
The GF Value is a unique assessment of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For ZTO Express (Cayman) (ZTO, Financial), the GF Value Line indicates a fair trading value significantly higher than its current market price of $20.4 per share, with a market cap of $16.60 billion. This discrepancy suggests that ZTO Express (Cayman) is significantly undervalued, potentially offering a lucrative long-term return for investors.
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Financial Strength
Investors must consider a company's financial strength to avoid the risk of permanent capital loss. ZTO Express (Cayman)'s cash-to-debt ratio of 0.97 ranks above 66.95% of the companies in the Transportation industry, indicating a strong financial position. With an overall financial strength rating of 8 out of 10, ZTO Express (Cayman)'s robust financial health is evident.
Profitability and Growth
Profitable companies with consistent performance, like ZTO Express (Cayman), are generally considered safer investments. ZTO Express (Cayman) has maintained profitability for 9 out of the past 10 years, with a notable operating margin of 25.74%, outperforming 85.82% of its peers. The company's profitability rank is a strong 9 out of 10. In terms of growth, ZTO Express (Cayman)'s 3-year average revenue growth rate surpasses 73.4% of the industry, and its EBITDA growth rate of 10.2% is also competitive.
ROIC vs WACC
Analyzing ZTO Express (Cayman)'s profitability through its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) reveals that the company is creating value for its shareholders. With a ROIC of 11.34% against a WACC of 2.76%, the company's effective use of capital is clear.
Conclusion
In conclusion, ZTO Express (Cayman) (ZTO, Financial) presents a compelling case for investment, with its stock appearing significantly undervalued. The company's strong financial condition, robust profitability, and favorable growth rates position it well for future success. To gain a deeper understanding of ZTO Express (Cayman)'s financial journey, investors are encouraged to 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.
