With a recent daily loss of -3.59%, a 3-month gain of 17.43%, and an Earnings Per Share (EPS) (EPS) of 3.04, Hawkins Inc (HWKN, Financial) presents an interesting case for valuation analysis. Is the stock modestly overvalued? This article aims to answer this question and provide a comprehensive analysis of Hawkins' intrinsic value. We invite you to delve into the following sections for a better understanding of the company's financial health and market performance.
A Snapshot of Hawkins Inc
Hawkins Inc is a renowned manufacturer and distributor of a variety of chemicals and ingredients. The company, which primarily operates within the United States, is organized into three segments: industrial, water treatment, and health and nutrition. Its industrial segment generates the majority of its revenue, selling products such as private label bleach, sulfuric acid, and aqua ammonia. The company's current stock price stands at $59.42, while its GF Value, an estimation of fair value, is $48.39.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is deemed overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to our valuation method, Hawkins (HWKN, Financial) appears to be modestly overvalued. Given this overvaluation, the long-term return of its stock is likely to be lower than its business growth.
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Assessing Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Hawkins has a cash-to-debt ratio of 0.07, which is worse than 91.39% of 1475 companies in the Chemicals industry. Overall, Hawkins' financial strength is rated 7 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, poses less risk. Hawkins has been profitable 9 out of the past 10 years. With an operating margin of 9.87%, Hawkins ranks better than 65.09% of 1478 companies in the Chemicals industry. Overall, Hawkins' profitability is rated 8 out of 10, indicating strong profitability.
Growth is a critical factor in a company's valuation. Hawkins' 3-year average annual revenue growth rate is 20.6%, ranking better than 76.76% of 1424 companies in the Chemicals industry. Its 3-year average EBITDA growth rate is 22.8%, ranking better than 69.91% of 1316 companies in the Chemicals industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Hawkins' ROIC was 13.05, while its WACC was 7.75.
Conclusion
In summary, the stock of Hawkins (HWKN, Financial) appears to be modestly overvalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 69.91% of companies in the Chemicals industry. To learn more about Hawkins stock, you can check out its 30-Year Financials here.
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