With a daily gain of 3.99% and a three-month loss of 13.04%, investors are taking a closer look at ZTO Express (Cayman) Inc (ZTO, Financial) and its Earnings Per Share (EPS) of 1.49. The question arises: is the company's stock modestly undervalued? This article embarks on a valuation analysis to uncover the answer, inviting readers to explore the financial intricacies of ZTO Express (Cayman).
Company Introduction
ZTO Express (Cayman) Inc is China's largest express delivery company by parcel volume, boasting a significant market share. Founded in 2002, it has established a robust network partner model that ensures efficient first-mile pickup and last-mile delivery services. With a strategic investment from Alibaba Group and strong leadership under Meisong Lai, ZTO Express (Cayman) is a formidable player in the logistics industry. When compared to the GF Value, which suggests a fair value of $29.56, the current stock price of $20.87 indicates that ZTO Express (Cayman) may be undervalued, presenting a potentially attractive opportunity for investors.
Summarize GF Value
The GF Value is a unique measure that estimates the intrinsic value of ZTO Express (Cayman) Inc, taking into account historical trading multiples, a GuruFocus adjustment factor, and future business performance forecasts. If the stock price is significantly above the GF Value Line, it may be overvalued, suggesting a lower future return. Conversely, if the stock price is well below this line, it could indicate a higher future return. With a market cap of $17 billion and a stock price of $20.87, ZTO Express (Cayman) appears to be modestly undervalued according to the GF Value.
Because ZTO Express (Cayman) Inc is relatively undervalued, the long-term return of its stock is expected to exceed its business growth, potentially making it a compelling choice for investors seeking value.
Financial Strength
Investors should consider a company's financial strength to avoid the risk of capital loss. ZTO Express (Cayman) Inc's cash-to-debt ratio of 0.97 ranks it ahead of 66.88% of companies in the Transportation industry. This strong balance sheet is reflected in the company's financial strength rating of 8 out of 10 from GuruFocus.
Profitability and Growth
Profitable companies generally pose less risk, and ZTO Express (Cayman) Inc's track record of profitability is impressive. With a robust operating margin that outperforms most of its industry peers, the company's financial health seems strong. Additionally, ZTO Express (Cayman)'s revenue and EBITDA growth rates are commendable, indicating a positive outlook for the company's growth and, consequently, its valuation.
ROIC vs WACC
By comparing the Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC), investors can gauge a company's profitability. ZTO Express (Cayman) Inc's ROIC of 11.34 is significantly higher than its WACC of 2.4, indicating efficient capital management and value creation for shareholders.
Conclusion
In conclusion, ZTO Express (Cayman) Inc (ZTO, Financial) is estimated to be modestly undervalued. The company's financial strength and profitability are robust, and its growth metrics are favorable when compared to industry peers. For a more detailed financial analysis, interested parties can review ZTO Express (Cayman)'s 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.
