Yahoo Finance The Intergroup Stock Gives Every Indication Of Being Significantly Overvalued
- By GF Value
The stock of The Intergroup (NAS:INTG, 30-year Financials) gives every indication of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $46.95 per share and the market cap of $105 million, The Intergroup stock shows every sign of being significantly overvalued. GF Value for The Intergroup is shown in the chart below.
Because The Intergroup is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. The Intergroup has a cash-to-debt ratio of 0.24, which is in the middle range of the companies in Travel & Leisure industry. GuruFocus ranks the overall financial strength of The Intergroup at 2 out of 10, which indicates that the financial strength of The Intergroup is poor. This is the debt and cash of The Intergroup over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. The Intergroup has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $25.1 million and earnings of $1.36 a share. Its operating margin is -36.52%, which ranks worse than 66% of the companies in Travel & Leisure industry. Overall, the profitability of The Intergroup is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of The Intergroup over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. 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 The Intergroup is -8.7%, which ranks in the middle range of the companies in Travel & Leisure industry. The 3-year average EBITDA growth rate is -23.9%, which ranks worse than 76% of the companies in Travel & Leisure industry.
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, The Intergroup's ROIC is -7.99 while its WACC came in at 4.99. The historical ROIC vs WACC comparison of The Intergroup is shown below:
In summary, The stock of The Intergroup (NAS:INTG, 30-year Financials) is estimated to be significantly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 76% of the companies in Travel & Leisure industry. To learn more about The Intergroup stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
