Despite a daily loss of 12.65% and a three-month loss of 10.89%, Air Products & Chemicals Inc (APD, Financial) boasts an impressive Earnings Per Share (EPS) of 9.83. The question we aim to answer is, "Is this stock modestly undervalued?" Let's delve into a comprehensive valuation analysis of Air Products & Chemicals.
A Glimpse into Air Products & Chemicals Inc (APD, Financial)
Founded in 1940, Air Products & Chemicals has grown into a global leader in the industrial gas supply sector, with operations in 50 countries and a workforce of 19,000. The company holds the distinction of being the world's largest supplier of hydrogen and helium. Its unique portfolio caters to a variety of industries, including chemicals, energy, healthcare, metals, and electronics. In fiscal 2022, Air Products generated $12.7 billion in revenue.
Now, comparing the current stock price of $254.46 with the GF Value of $325.17, we see that Air Products & Chemicals is modestly undervalued. Here's a look at the company's income breakdown:
Understanding the GF Value
The GF Value is a proprietary measure that represents a stock's intrinsic value. It is derived from three key factors: historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) at which the stock has traded, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance.
The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. If the stock 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.
Based on GuruFocus' valuation method, Air Products & Chemicals (APD, Financial) appears to be modestly undervalued. Since it is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth. Here's the GF Value chart of Air Products & Chemicals:
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A Look at the Financial Strength of Air Products & Chemicals
Before investing in a company, it is crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. A great way to understand a company's financial strength is by looking at the cash-to-debt ratio and interest coverage.
Air Products & Chemicals has a cash-to-debt ratio of 0.19, which is worse than 80.11% of the companies in the Chemicals industry. The overall financial strength of Air Products & Chemicals is 6 out of 10, indicating fair financial strength. Here's a look at the company's debt and cash over the past years:
Profitability and Growth of Air Products & Chemicals
Companies that have been consistently profitable over the long term offer less risk for investors. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Air Products & Chemicals has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $13 billion and Earnings Per Share (EPS) of $9.83. Its operating margin is 20.81%, which ranks better than 90.93% of the companies in the Chemicals industry. Overall, the profitability of Air Products & Chemicals is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. Air Products & Chemicals's 3-year average revenue growth rate is better than 58.6% of the companies in the Chemicals industry. However, its 3-year average EBITDA growth rate is 6.2%, which ranks worse than 58.15% of the companies in the Chemicals industry.
ROIC vs WACC Comparison
A company's profitability can also be evaluated by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Air Products & Chemicals's ROIC was 9.31 while its WACC came in at 8.91. Here's the historical ROIC vs WACC comparison of Air Products & Chemicals:
Conclusion
In conclusion, Air Products & Chemicals (APD, Financial) stock appears to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 58.15% of the companies in the Chemicals industry. To learn more about Air Products & Chemicals stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
