Ibnsina Pharma Stock Is Believed To Be Significantly Undervalued
- By GF Value
The stock of Ibnsina Pharma (CAI:IBNP.CA, 30-year Financials) is estimated to be significantly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of EGP 4.04 per share and the market cap of EGP 3.9 billion, Ibnsina Pharma stock is estimated to be significantly undervalued. GF Value for Ibnsina Pharma is shown in the chart below.
Because Ibnsina Pharma is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth, which averaged 21.9% over the past five years.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Ibnsina Pharma has a cash-to-debt ratio of 0.00, which is in the bottom 10% of the companies in Medical Distribution industry. GuruFocus ranks the overall financial strength of Ibnsina Pharma at 4 out of 10, which indicates that the financial strength of Ibnsina Pharma is poor. This is the debt and cash of Ibnsina Pharma over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Ibnsina Pharma has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of EGP 18.7 billion and earnings of EGP 0.183 a share. Its operating margin is 0.96%, which ranks worse than 76% of the companies in Medical Distribution industry. Overall, the profitability of Ibnsina Pharma is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Ibnsina Pharma over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Ibnsina Pharma's 3-year average revenue growth rate is better than 89% of the companies in Medical Distribution industry. Ibnsina Pharma's 3-year average EBITDA growth rate is 14.1%, which ranks in the middle range of the companies in Medical Distribution industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Ibnsina Pharma's ROIC is 2.30 while its WACC came in at 11.06. The historical ROIC vs WACC comparison of Ibnsina Pharma is shown below:
In closing, the stock of Ibnsina Pharma (CAI:IBNP.CA, 30-year Financials) is estimated to be significantly undervalued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the middle range of the companies in Medical Distribution industry. To learn more about Ibnsina Pharma stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
