Installed Building Products Inc (IBP, Financial) recently experienced a daily loss of 4.01%, despite a 3-month gain of 9.42%. With an Earnings Per Share (EPS) of 8.84, a key question arises: is the stock significantly overvalued? This article delves into the valuation of Installed Building Products, encouraging readers to explore the detailed analysis that follows.
Company Overview
Installed Building Products Inc is a premier installer of insulation products for the residential new construction market in the United States. The company also installs a variety of complementary building products, including waterproofing, fire-stopping, and more. With three operating segments—Installation, Manufacturing, and Distribution—most of its revenue is generated from the Installation segment. Despite a robust service offering, Installed Building Products' current stock price of $224.06 and a market cap of $6.40 billion significantly overshoots its GF Value of $146.57, suggesting a potential overvaluation.
Understanding GF Value
The GF Value is a proprietary measure calculated to represent the intrinsic value of a stock. It incorporates historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. According to this measure, Installed Building Products appears significantly overvalued. The GF Value suggests that the fair market price should ideally be around $146.57, which is considerably lower than its current trading price.
Financial Strength and Risks
Investing in companies with robust financial strength reduces the risk of permanent capital loss. Installed Building Products, with a cash-to-debt ratio of 0.42, shows a weaker position compared to 53.47% of its industry peers. However, its financial strength is rated 7 out of 10 by GuruFocus, indicating a fair financial health.
Profitability and Growth Prospects
Installed Building Products has consistently demonstrated profitability, with a strong operating margin of 13.52%, ranking better than 68% of its industry competitors. The company's 3-year average annual revenue growth rate of 20.8% outpaces 84.54% of peers, indicating robust growth prospects. These financial metrics suggest a solid foundation for future performance.
Moreover, comparing the Return on Invested Capital (ROIC) at 19.34 to the Weighted Average Cost of Capital (WACC) at 15.37 highlights the company's efficiency in generating returns on investments higher than its costs, further affirming its profitability.
Conclusion
While Installed Building Products (IBP, Financial) displays strong financial health and growth potential, its current market price significantly exceeds its GF Value, indicating that it is potentially overvalued. Investors should consider this analysis carefully when making investment decisions. For a deeper understanding of Installed Building Products' financials, consider exploring 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.
