With a notable daily gain of 9.76% and an impressive three-month gain of 66.42%, Kronos Worldwide Inc (KRO, Financial) has attracted significant investor attention. However, despite these gains, the company shows a Loss Per Share of 0.23. This analysis seeks to determine whether Kronos Worldwide (KRO) is modestly overvalued as suggested by the GF Value, which stands at $11.06, compared to its current trading price of $14.17.
Company Overview
Kronos Worldwide Inc manufactures and sells titanium dioxide pigments, crucial for a variety of uses, particularly in coatings and plastics. The company's significant market presence in the United States underscores its pivotal role in the chemicals industry. Given the current stock price of $14.17 and a market cap of $1.60 billion, an assessment against the GF Value suggests a potential overvaluation. Below is the company's income breakdown:
Understanding GF Value
The GF Value is a proprietary measure reflecting the perceived true value of a stock, calculated from historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If Kronos Worldwide's stock trades above this line, it might be overvalued, suggesting lower future returns. Conversely, trading below this line indicates potential undervaluation and higher future returns. Currently, the GF Value indicates that Kronos Worldwide (KRO, Financial) is modestly overvalued.
Financial Strength and Risks
Investing in companies with solid financial strength reduces the risk of permanent loss. Kronos Worldwide's cash-to-debt ratio of 0.27 positions it poorly compared to 72.69% of its industry peers. The company's overall financial strength is rated 5 out of 10, suggesting fair financial health but also highlighting areas for potential concern.
Profitability and Growth Prospects
Kronos Worldwide has maintained profitability over the past decade. However, its operating margin of -1.46% is lower than 81.14% of its competitors in the chemicals industry. Furthermore, the company's growth has been relatively stagnant, with an average annual revenue growth of 0.7%, ranking below 74.37% of its industry peers.
ROIC vs WACC Analysis
Evaluating the Return on Invested Capital (ROIC) against the Weighted Average Cost of Capital (WACC) offers insights into value creation. Kronos Worldwide's ROIC of -1.22 compared to its WACC of 9.73 suggests it is currently not generating sufficient returns on its investments, which could be a red flag for potential investors.
Conclusion and Investment Potential
In conclusion, while Kronos Worldwide (KRO, Financial) exhibits a strong market presence and has shown significant stock price gains, its current valuation according to GF Value suggests it is modestly overvalued. Investors should consider this analysis in light of the company's fair financial strength, modest profitability, and limited growth prospects. For further details on Kronos Worldwide's financials, interested parties can explore the 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.
