As of July 18, 2023, International Flavors & Fragrances Inc (IFF, Financial), a leading global specialty ingredients producer, has seen a 3.56% change in its stock price, now standing at $82.31. With a market cap of $21 billion, the company generated sales of $12.2 billion. However, the company's GF Value, a unique intrinsic value indicator, is pegged at $128.9, indicating a possible value trap situation, according to GuruFocus valuation.
International Flavors & Fragrances partners with customers to deliver custom solutions across various sectors, including food, beverage, health, household goods, personal care, and pharmaceuticals. It is also a leading fragrance producer and a global leader in probiotics and enzymes. Despite its diverse portfolio, the company's current EPS stands at $-8.2, pointing towards potential financial challenges.
Understanding the GF Value
The GF Value is a proprietary valuation model developed by GuruFocus, providing an estimation of a stock's intrinsic value. It considers historical trading multiples, an adjustment factor based on past performance and growth, and future business performance estimates. A share price significantly above the GF Value Line may indicate an overvalued stock with poor future returns. Conversely, a price substantially below the GF Value suggests an undervalued stock with higher future returns. For International Flavors & Fragrances, the current GF Value suggests investors should think twice before investing.
Financial Strength and Profitability
Investing in financially strong companies reduces the risk of permanent capital loss. International Flavors & Fragrances has a cash-to-debt ratio of 0.05, ranking worse than 94.09% of companies in the Chemicals industry, suggesting a poor balance sheet. On the profitability front, the company has been profitable 9 years over the past 10 years, with an operating margin of 7.25%, better than 51.13% of companies in the same industry.
Growth and ROIC vs WACC
Growth is a crucial factor in a company's valuation. International Flavors & Fragrances’s 3-year average revenue growth rate is worse than 73.19% of companies in the Chemicals industry. Moreover, its return on invested capital (ROIC) of 2.95 is less than its weighted average cost of capital (WACC) of 7.67, indicating that the company is not creating value for shareholders.
Conclusion
Considering the financial condition, profitability, growth, and GF Value of International Flavors & Fragrances, the stock appears to be a potential value trap. Investors should think twice before investing. To learn more about International Flavors & Fragrances stock, you can check out its 30-Year Financials here.
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