On a recent trading day, Blue Bird Corp (BLBD, Financial) experienced a significant daily gain of 5.69%, contributing to a three-month gain of 56.93%. Despite these impressive numbers, a deeper look into the company's financials, specifically its Earnings Per Share (EPS) of 2.47, raises the question: Is the stock significantly overvalued? This analysis aims to explore Blue Bird's valuation in depth, encouraging readers to consider whether the current stock price truly reflects the company's intrinsic value.
Company Overview
Blue Bird Corp, an American bus manufacturer, operates primarily in two segments: Bus and Parts. The Bus segment focuses on the design, engineering, manufacturing, and sales of school buses along with extended warranties. Meanwhile, the Parts segment deals with the sales of replacement bus parts. Predominantly active in the United States, Canada, and other international markets, Blue Bird has established itself as a leader in its industry. Despite a robust operational model, there's a stark contrast between its current stock price of $53.12 and the GF Value of $26.27, suggesting that the stock might be significantly overvalued.
Understanding GF Value
The GF Value is a proprietary measure reflecting the intrinsic value of a stock, based on historical trading multiples, a GuruFocus adjustment factor, and projected future business performance. This metric suggests a fair trading value, around which the stock price should ideally fluctuate. Currently, Blue Bird's market cap stands at $1.70 billion, with a stock price substantially higher than the GF Value. This discrepancy indicates that Blue Bird is potentially overvalued, which could lead to poorer future returns compared to its business growth.
Financial Strength and Profitability
Assessing a company's financial strength is crucial before investing. Blue Bird's cash-to-debt ratio of 0.94 is favorable compared to 59.47% of its industry peers. This strong financial position is reflected in its financial strength rating of 8 out of 10. Furthermore, Blue Bird has maintained profitability over the years, with a noteworthy operating margin of 9.73%, ranking better than 76.21% of its competitors in the Vehicles & Parts industry.
Comparative Analysis of ROIC and WACC
An effective way to gauge a company's profitability and value creation is by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Blue Bird's ROIC stands impressively at 37.67, significantly surpassing its WACC of 11.83, indicating efficient management and promising shareholder value creation.
Conclusion
While Blue Bird (BLBD, Financial) demonstrates strong financial health and profitability, its current market valuation significantly exceeds its GF Value, suggesting it is overvalued. Prospective investors should consider this analysis carefully and monitor potential market adjustments. For those interested in further details on Blue Bird's financials, visit the 30-Year Financials here.
To discover other high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
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.
