With a notable daily gain of 9.27% and a three-month gain of 20.03%, Hawkins Inc (HWKN, Financial) presents itself as a robust performer in the stock market. However, a deeper dive into its financials, specifically an Earnings Per Share (EPS) of 3.59, raises a critical question: Is Hawkins significantly overvalued? This analysis aims to shed light on this query by examining the GF Value and other financial metrics.
Company Overview
Hawkins Inc manufactures and distributes a variety of essential chemicals and ingredients across three primary segments: industrial, water treatment, and health and nutrition. Most of its revenue is generated within the United States. Despite its current stock price of $83.7, the GF Value estimates its fair value at only $51.54, indicating a significant overvaluation. This valuation discrepancy warrants a closer examination of the company's financial health and market position.
Understanding the GF Value
The GF Value is a proprietary measure calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Hawkins, the GF Value suggests that the stock is significantly overvalued, which could imply poorer future returns. This assessment is crucial for investors considering the long-term value and potential return on investment.
Financial Strength and Stability
Investors must consider a company's financial strength before investing. Hawkins's cash-to-debt ratio stands at 0.04, ranking lower than 95.55% of its peers in the chemicals industry. This metric, along with a financial strength rating of 7 out of 10 from GuruFocus, suggests a fair balance sheet but highlights areas of potential concern regarding its debt levels.
Profitability and Growth Prospects
Hawkins has demonstrated profitability in 9 out of the past 10 years, with a revenue of $919.20 million and an operating margin of 11.08% over the past 12 months. Its profitability ranks well against industry peers, and its growth metrics are also strong, with a 3-year average EBITDA growth rate of 22.8%. These figures suggest robust business operations and potential for continued growth.
Moreover, comparing the Return on Invested Capital (ROIC) of 14.52 to the Weighted Average Cost of Capital (WACC) of 8.27 indicates that Hawkins is effectively creating value for its shareholders, as shown in the ROIC vs WACC comparison below:
Conclusion
Despite the strong operational performance of Hawkins Inc (HWKN, Financial), the significant overvaluation based on the GF Value suggests caution. Investors should consider this analysis and the company's financial health when making investment decisions. For more detailed financial data on Hawkins, explore its 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.
