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Yahoo
8 hours ago
- Business
- Yahoo
DorianG (NYSE:LPG) stock performs better than its underlying earnings growth over last five years
When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Dorian LPG Ltd. (NYSE:LPG) stock is up an impressive 218% over the last five years. Better yet, the share price has risen 12% in the last week. On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price. Over half a decade, DorianG managed to grow its earnings per share at 0.3% a year. This EPS growth is slower than the share price growth of 26% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. You can see how EPS has changed over time in the image below (click on the chart to see the exact values). It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on DorianG's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further. It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for DorianG the TSR over the last 5 years was 567%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return. Investors in DorianG had a tough year, with a total loss of 32% (including dividends), against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 46% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with DorianG (including 1 which is potentially serious) . DorianG is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
11 hours ago
- Business
- Yahoo
An Intrinsic Calculation For Swisscom AG (VTX:SCMN) Suggests It's 44% Undervalued
Swisscom's estimated fair value is CHF993 based on 2 Stage Free Cash Flow to Equity Current share price of CHF557 suggests Swisscom is potentially 44% undervalued Our fair value estimate is 91% higher than Swisscom's analyst price target of CHF520 Today we will run through one way of estimating the intrinsic value of Swisscom AG (VTX:SCMN) by taking the forecast future cash flows of the company and discounting them back to today's value. We will use the Discounted Cash Flow (DCF) model on this occasion. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (CHF, Millions) CHF1.45b CHF1.26b CHF1.47b CHF1.67b CHF1.74b CHF1.79b CHF1.83b CHF1.87b CHF1.89b CHF1.91b Growth Rate Estimate Source Analyst x4 Analyst x4 Analyst x4 Analyst x3 Est @ 4.28% Est @ 3.12% Est @ 2.31% Est @ 1.74% Est @ 1.35% Est @ 1.07% Present Value (CHF, Millions) Discounted @ 3.9% CHF1.4k CHF1.2k CHF1.3k CHF1.4k CHF1.4k CHF1.4k CHF1.4k CHF1.4k CHF1.3k CHF1.3k ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = CHF14b After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 0.4%. We discount the terminal cash flows to today's value at a cost of equity of 3.9%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = CHF1.9b× (1 + 0.4%) ÷ (3.9%– 0.4%) = CHF55b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= CHF55b÷ ( 1 + 3.9%)10= CHF38b The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is CHF51b. In the final step we divide the equity value by the number of shares outstanding. Compared to the current share price of CHF557, the company appears quite good value at a 44% discount to where the stock price trades currently. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Swisscom as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 3.9%, which is based on a levered beta of 0.800. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Swisscom Strength Debt is well covered by earnings and cashflows. Dividends are covered by earnings and cash flows. Dividend is in the top 25% of dividend payers in the market. Weakness Earnings declined over the past year. Opportunity Annual revenue is forecast to grow faster than the Swiss market. Trading below our estimate of fair value by more than 20%. Threat Annual earnings are forecast to grow slower than the Swiss market. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. What is the reason for the share price sitting below the intrinsic value? For Swisscom, there are three relevant aspects you should look at: Risks: You should be aware of the 1 warning sign for Swisscom we've uncovered before considering an investment in the company. Future Earnings: How does SCMN's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. Simply Wall St updates its DCF calculation for every Swiss stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
The Returns On Capital At Floor & Decor Holdings (NYSE:FND) Don't Inspire Confidence
To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Floor & Decor Holdings (NYSE:FND) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Floor & Decor Holdings, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.061 = US$252m ÷ (US$5.4b - US$1.3b) (Based on the trailing twelve months to March 2025). So, Floor & Decor Holdings has an ROCE of 6.1%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 13%. See our latest analysis for Floor & Decor Holdings Above you can see how the current ROCE for Floor & Decor Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Floor & Decor Holdings for free. On the surface, the trend of ROCE at Floor & Decor Holdings doesn't inspire confidence. To be more specific, ROCE has fallen from 8.1% over the last five years. However it looks like Floor & Decor Holdings might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments. Bringing it all together, while we're somewhat encouraged by Floor & Decor Holdings' reinvestment in its own business, we're aware that returns are shrinking. And investors may be recognizing these trends since the stock has only returned a total of 30% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere. If you're still interested in Floor & Decor Holdings it's worth checking out our to see if it's trading at an attractive price in other respects. While Floor & Decor Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Kumba Iron Ore (JSE:KIO) Could Be Struggling To Allocate Capital
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Kumba Iron Ore (JSE:KIO), they do have a high ROCE, but we weren't exactly elated from how returns are trending. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Kumba Iron Ore is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.26 = R23b ÷ (R99b - R12b) (Based on the trailing twelve months to December 2024). Therefore, Kumba Iron Ore has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry. See our latest analysis for Kumba Iron Ore Above you can see how the current ROCE for Kumba Iron Ore compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Kumba Iron Ore for free. On the surface, the trend of ROCE at Kumba Iron Ore doesn't inspire confidence. While it's comforting that the ROCE is high, five years ago it was 48%. And considering revenue has dropped while employing more capital, we'd be cautious. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased. From the above analysis, we find it rather worrisome that returns on capital and sales for Kumba Iron Ore have fallen, meanwhile the business is employing more capital than it was five years ago. Investors must expect better things on the horizon though because the stock has risen 1.0% in the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere. If you'd like to know more about Kumba Iron Ore, we've spotted 2 warning signs, and 1 of them doesn't sit too well with us. Kumba Iron Ore is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
3 days ago
- Business
- Yahoo
Return Trends At PWO (ETR:PWO) Aren't Appealing
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating PWO (ETR:PWO), we don't think it's current trends fit the mold of a multi-bagger. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for PWO, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.072 = €20m ÷ (€445m - €168m) (Based on the trailing twelve months to March 2025). Thus, PWO has an ROCE of 7.2%. Ultimately, that's a low return and it under-performs the Auto Components industry average of 11%. Check out our latest analysis for PWO In the above chart we have measured PWO's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering PWO for free. Things have been pretty stable at PWO, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if PWO doesn't end up being a multi-bagger in a few years time. This probably explains why PWO is paying out 43% of its income to shareholders in the form of dividends. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders. In summary, PWO isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 106% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward. On a final note, we found 3 warning signs for PWO (1 is a bit concerning) you should be aware of. While PWO isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
