PGT Innovations Inc (PGTI, Financial) has recently experienced a notable daily gain of 9.39%, alongside a substantial 3-month gain of 48.83%. With an Earnings Per Share (EPS) of $1.92, investors may be intrigued by the company's performance. However, the pressing question remains: is PGT Innovations significantly overvalued? This article provides a valuation analysis to explore the answer, inviting readers to delve into the following detailed assessment.
Company Introduction
PGT Innovations Inc, a leading manufacturer of impact-resistant windows and doors, boasts a diverse range of customizable products. The company's distribution network spans across the Caribbean, Florida, Canada, and parts of South and Central America, with a significant revenue stream originating from Florida. Despite PGT Innovations' current stock price of $39.48, the GF Value suggests a fair value estimate of $29.21, indicating a potential overvaluation. This discrepancy sets the stage for a deeper investigation into the company's intrinsic value.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. When a stock's price significantly exceeds the GF Value Line, it is deemed overvalued, potentially leading to poorer future returns. Conversely, a price below the GF Value Line suggests undervaluation and the possibility of higher future returns. Currently, PGT Innovations (PGTI, Financial) is significantly overvalued according to the GF Value, with a market price of $39.48 compared to the fair value of $29.21.
Given this significant overvaluation, the long-term return of PGT Innovations' stock may fall short of its future business growth potential.
Link: These companies may deliver higher future returns at reduced risk.Financial Strength
Investors must scrutinize a company's financial strength to mitigate the risk of permanent capital loss. Key indicators such as the cash-to-debt ratio and interest coverage can provide insights into financial robustness. PGT Innovations' cash-to-debt ratio stands at 0.05, positioning it unfavorably compared to 93.11% of peers in the Construction industry. With an overall financial strength rating of 5 out of 10, PGT Innovations exhibits fair financial health.
Profitability and Growth
Consistent profitability is a hallmark of less risky investments, and PGT Innovations has shown profitability over the past decade. The company's 12-month revenue reached $1.50 billion, with an Earnings Per Share (EPS) of $1.92. Its operating margin of 12.86% surpasses 82.57% of its Construction industry counterparts. GuruFocus rates PGT Innovations' profitability as strong.
The company's growth is also a critical factor in valuation. PGT Innovations' 3-year average annual revenue growth rate is 25.2%, ranking favorably within its industry. Its 3-year average EBITDA growth rate is 22.9%, indicating solid growth prospects.
ROIC vs. WACC
An effective way to gauge profitability is by comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC). ROIC indicates how efficiently a company generates cash flow relative to the capital invested. Ideally, ROIC should exceed WACC. PGT Innovations' ROIC is 10.34, outpacing its WACC of 8.82, suggesting efficient capital utilization.
Conclusion
Despite the strong financial condition and profitability of PGT Innovations (PGTI, Financial), the stock appears significantly overvalued based on current market prices. The company's growth outperforms a large percentage of its industry peers, further underlining its potential. For a deeper understanding of PGT Innovations' financials, 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.
