Amidst the daily fluctuations of the stock market, Taro Pharmaceutical Industries Ltd (TARO, Financial) has recently experienced a notable daily gain of 9.62%, complemented by a 3-month gain of 8.13%. With an Earnings Per Share (EPS) of $0.68, investors and analysts alike are keen to determine whether the stock is fairly valued. This article delves into the valuation analysis of Taro Pharmaceutical Industries, providing readers with a comprehensive understanding of its current market standing.
Company Introduction
Taro Pharmaceutical Industries Ltd (TARO, Financial) is a renowned entity in the pharmaceutical sector, dedicated to the production, research, development, and marketing of a diverse range of pharmaceutical products. With a primary focus on semi-solid formulations such as creams and ointments, Taro Pharmaceutical Industries also offers liquids, capsules, and tablets. Its operations span across therapeutic categories including dermatological, cardiovascular, neuropsychiatric, and anti-inflammatory. The United States serves as its major revenue source, with additional presence in Canada, Israel, and other countries. Comparing the company's stock price of $41.58 to the GF Value of $44.24, we embark on an in-depth evaluation of its intrinsic value.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This value acts as a benchmark, suggesting a fair trading price for the stock. When the stock price significantly surpasses the GF Value Line, it may be considered overvalued, potentially leading to lower future returns. Conversely, prices well below the GF Value Line could indicate undervaluation and the prospect of higher future returns. Taro Pharmaceutical Industries (TARO, Financial), with a market cap of $1.60 billion, appears to be fairly valued at its current price, suggesting that the long-term return of its stock may align closely with the company's growth rate.
Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of permanent capital loss. Analyzing Taro Pharmaceutical Industries' cash-to-debt ratio and interest coverage provides insight into its financial robustness. With a cash-to-debt ratio of 465.15, Taro Pharmaceutical Industries stands stronger than 92.28% of its industry peers. Its overall financial strength has been impressively rated 10 out of 10 by GuruFocus, indicating a solid financial foundation.
Profitability and Growth
Consistent profitability over an extended period is a hallmark of a less risky investment. Taro Pharmaceutical Industries has maintained profitability for 9 out of the past 10 years. In the last year, the company reported revenues of $453.70 million and an operating margin of 1.34%, although its performance in this area is lower than 61.97% of the industry. Nevertheless, its profitability rank is a robust 8 out of 10. In terms of growth, Taro Pharmaceutical Industries' 3-year average revenue growth rate lags behind 76.09% of industry competitors, with a 3-year average EBITDA growth rate of -38.8% ranking lower than 92.95% of its peers.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another method to assess profitability. Ideally, the ROIC should exceed the WACC, indicating efficient capital usage. Taro Pharmaceutical Industries' ROIC over the past 12 months stands at 0.32, while its WACC is 5.87, suggesting a potential area for improvement.
Conclusion
Overall, Taro Pharmaceutical Industries (TARO, Financial) stock seems to be fairly valued. The company's financial condition is robust, and its profitability is strong. However, its growth ranks lower than a significant portion of the Drug Manufacturers industry. For a deeper understanding of Taro Pharmaceutical Industries' financials, interested parties can explore 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.
