Core Laboratories Inc (CLB, Financial) recently experienced a daily gain of 6.36% and a 3-month gain of 5.19%. With an Earnings Per Share (EPS) of 0.5, it raises the question: is the stock fairly valued? This article aims to answer this question by conducting a thorough valuation analysis of Core Laboratories. We invite you to read on and gain valuable insights into the company's financial status and performance.
A Snapshot of Core Laboratories
Core Laboratories Inc is recognized as the leading provider of reservoir description and production enhancement services for oil and gas exploration and production. The company offers data and analytics to assist well operators in identifying optimal methods for recovering, processing, and refining hydrocarbons from a well. Additionally, it manufactures the necessary lab equipment for its services.
With a stock price of $24.93 and a fair value (GF Value) of $25.99, Core Laboratories commands a market cap of $1.20 billion. Let's delve deeper into the company's value by examining its financial performance and key metrics.
Understanding the GF Value
The GF Value is a unique measure representing the intrinsic value of a stock. It is determined based on historical trading multiples, a GuruFocus adjustment factor derived from the company's past returns and growth, and future estimates of business performance.
Core Laboratories (CLB, Financial) appears to be fairly valued according to the GuruFocus Value calculation. This estimate of fair value is based on historical multiples at which the stock has traded, past business growth, and future estimates of business performance. If a stock's price is significantly above the GF Value Line, it is 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. With its current price of $24.93 per share and a market cap of $1.20 billion, Core Laboratories seems to be fairly valued.
As Core Laboratories is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of Core Laboratories
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial for investors to carefully review a company's financial strength before deciding to buy shares. Core Laboratories has a cash-to-debt ratio of 0.07, which ranks worse than 83.56% of 1034 companies in the Oil & Gas industry. Based on this, GuruFocus ranks Core Laboratories's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth of Core Laboratories
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Core Laboratories has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $502.80 million and an Earnings Per Share (EPS) of $0.5. Its operating margin is 9.02%, which ranks better than 50.81% of 984 companies in the Oil & Gas industry. Overall, the profitability of Core Laboratories is ranked 8 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Core Laboratories is -11.3%, which ranks worse than 83.99% of 862 companies in the Oil & Gas industry. The 3-year average EBITDA growth rate is -22.3%, which ranks worse than 87.09% of 829 companies in the Oil & Gas industry.
ROIC vs WACC
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, Core Laboratories's ROIC is 6.1 while its WACC came in at 13.37.
Conclusion
In conclusion, the stock of Core Laboratories (CLB, Financial) shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 87.09% of 829 companies in the Oil & Gas industry. To learn more about Core Laboratories stock, you can check out its 30-Year Financials here.
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