Celanese Corp (CE, Financial) recently experienced a daily decrease of 1.94% in its stock price, yet it has gained 8.04% over the past three months. With an Earnings Per Share (EPS) of 18.17, investors and analysts are keen to determine if the stock is fairly valued. This analysis delves into Celanese's current market position and intrinsic value, providing insights into whether the stock represents a prudent investment at its current price of $158.29.
Company Overview
Celanese, a leading producer of specialty polymers and acetic acid, plays a pivotal role in various industries, from automotive to consumer goods. With a market cap of $17.70 billion and annual sales reaching $10.70 billion, its influence is substantial. The GF Value suggests a fair value estimate of $149.67 for Celanese, setting a benchmark for comparison against its current trading price. This valuation is crucial as it integrates Celanese's historical financial performance and market multiples with future business growth prospects.
Understanding GF Value
The GF Value is a proprietary measure reflecting the true intrinsic value of a stock, calculated using historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Celanese, the GF Value indicates the stock is fairly valued, suggesting that its market price aligns closely with the estimated true value. This alignment implies that the investment return potential of Celanese closely mirrors the company's future business growth rate.
Financial Strength and Risks
Investors must consider financial health as a critical factor before investing. Celanese's financial strength is currently rated 4 out of 10 by GuruFocus, primarily due to its low cash-to-debt ratio of 0.11, placing it lower than 88% of its peers in the Chemicals industry. This could indicate higher risk levels associated with the company's debt management practices.
Profitability and Growth Metrics
Celanese has maintained profitability over the past decade, with a robust operating margin of 10.94%, which surpasses 70.98% of its industry counterparts. However, its growth metrics present a mixed picture. The company's revenue has grown at an impressive annual rate of 28%, yet its 3-year average EBITDA growth rate lags at 1.8%. This discrepancy suggests that while the company is expanding, it may be facing challenges in scaling its earnings proportionately.
ROIC vs. WACC
Comparing the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) provides further insights into Celanese's value creation. Celanese's ROIC of 8.39 is currently below its WACC of 9.38, indicating the company may not be generating adequate returns on its investments relative to the costs of its capital.
Conclusion
While Celanese appears fairly valued based on the GF Value, potential investors should consider the company's modest financial strength and mixed growth indicators. For those interested in further exploration of Celanese's financials, detailed information can be found on its 30-Year Financials page.
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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.
