Masonite International Corp (DOOR, Financial) has recently experienced a notable daily loss of -15.97%, alongside a 3-month decline of -9.63%. Despite these market movements, the company boasts a solid Earnings Per Share (EPS) of 7.11. Investors are keen to understand: is Masonite International modestly undervalued? This article delves into a valuation analysis to uncover the answer, inviting readers to explore the financial nuances that could influence Masonite International's stock value.
Masonite International Corp is a prominent player in the construction sector, specializing in the design, manufacture, and distribution of both interior and exterior doors. The company's diverse product range caters to the residential and non-residential building construction markets, with a global footprint across North America, Europe, South America, and Asia. With a current stock price of $85.71, Masonite International's market cap stands at $1.90 billion, making it a significant subject for valuation analysis. This evaluation will compare the stock price against the GF Value, an estimated fair value, to provide a comprehensive view of the company's market positioning.
Understanding the GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock, based on historical trading multiples, an adjustment factor reflecting past performance and growth, and projected future business outcomes. The GF Value Line provides a benchmark for the stock's fair trading value, suggesting that the stock price will likely oscillate around this line. If Masonite International's stock price significantly exceeds the GF Value Line, it could be overvalued and potentially yield lower future returns. Conversely, if the price is well below this line, the stock might be undervalued, indicating the possibility of higher future returns.
Currently, Masonite International (DOOR, Financial) appears modestly undervalued according to the GF Value, which suggests a fair value based on meticulous analysis. With its market cap of $1.90 billion and a share price of $85.71, the stock's valuation indicates that it may offer favorable long-term returns, outpacing its business growth.
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Evaluating Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Masonite International's cash-to-debt ratio of 0.28 ranks in the lower half compared to its industry peers. Despite this, GuruFocus awards the company a financial strength rating of 6 out of 10, indicating a fair balance sheet.
Profitability and Growth Prospects
Investing in profitable companies, particularly those with a track record of consistent profitability, is generally less risky. A high-profit margin company like Masonite International, with an operating margin of 9.49%, is often a safer bet than one with lower margins. Having been profitable for 7 out of the past 10 years and with a revenue of $2.80 billion over the past twelve months, Masonite International's profitability is ranked at a robust 8 out of 10 by GuruFocus.
Growth is also a vital factor in a company's valuation. Masonite International's average annual revenue growth of 14.1% surpasses that of many peers within the construction industry. Furthermore, its 3-year average EBITDA growth rate of 30.2% is commendable, placing it ahead of the majority of its competitors.
Assessing ROIC vs. WACC
The comparison between a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Masonite International's ROIC over the past 12 months is 11.07%, outperforming its WACC of 9.39%, indicative of value creation for shareholders.
Conclusion
In conclusion, Masonite International (DOOR, Financial) is currently seen as modestly undervalued. The company exhibits a fair financial condition, strong profitability, and impressive growth, outshining 84.04% of its industry peers. For those interested in a deeper dive into Masonite International's financials, a thorough examination of its 30-Year Financials is available 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.
