Amid the daily fluctuations of the stock market, BellRing Brands Inc (BRBR, Financial) has recently experienced a notable 2.49% decline, contrasting with a significant 33.27% gain over the past three months. With an Earnings Per Share (EPS) of $1.23, investors are contemplating whether the stock is significantly overvalued. This article embarks on a valuation analysis to explore the true worth of BellRing Brands (BRBR), inviting readers to delve into the following comprehensive assessment.
Company Introduction
BellRing Brands Inc operates from the United States, specializing in nutrition products through its notable brands like Premier Protein, Dymatize, and PowerBar. The company boasts a diverse distribution network, encompassing club, food, drug, mass, eCommerce, and specialty channels. With a current stock price of $55.28 and a GF Value of just $12.8, there arises a question of significant overvaluation. This valuation discrepancy sets the stage for an in-depth analysis of BellRing Brands' intrinsic value, melding financial scrutiny with key business insights.
Understanding GF Value
The GF Value is a unique metric that assesses the intrinsic value of a stock by considering historical trading multiples, an adjustment factor based on past performance, and future business projections. When the stock price vastly exceeds the GF Value Line, it suggests an overvalued status, potentially leading to poorer future returns. Conversely, a price well below the GF Value Line could indicate undervaluation and the prospect of higher returns. For BellRing Brands (BRBR, Financial), the current share price of $55.28 strongly hints at a significant overvaluation.
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Financial Strength
Investing in companies with robust financial strength minimizes the risk of capital loss. BellRing Brands' cash-to-debt ratio of 0.06 places it lower than 86.11% of its peers in the Consumer Packaged Goods industry, signaling potential concerns. With a financial strength rating of 5 out of 10, BellRing Brands' financial health is deemed fair, though not without areas for improvement.
Profitability and Growth
Long-term profitability is a less risky indicator for potential investors. BellRing Brands has maintained profitability for 6 out of the past 10 years, with a revenue of $1.70 billion and an Earnings Per Share (EPS) of $1.23 over the last twelve months. The company's operating margin of 17.24% outperforms 89.1% of its industry counterparts, reflecting fair profitability with a rank of 7 out of 10.
Growth is a vital valuation component, with faster growth often leading to shareholder value creation. However, BellRing Brands' 3-year average annual revenue growth rate of -20.8% lags behind 93.07% of the industry, and its EBITDA growth rate of -21.1% also falls short, indicating less promising growth prospects.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insight into value creation. BellRing Brands' ROIC of 36.77 is significantly higher than its WACC of 8.93, suggesting effective cash flow generation relative to invested capital, and thus, value creation for shareholders.
Conclusion
In summary, BellRing Brands (BRBR, Financial) appears to be significantly overvalued when considering its current market price. The company exhibits fair financial health and profitability, yet its growth ranking is below par within the Consumer Packaged Goods industry. For a more detailed financial overview of BellRing Brands, interested parties 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.
