At first glance, Masco Corp (MAS, Financial) seems to be on a roller coaster ride. With a daily gain of 6.62% and a 3-month loss of -16.15%, the stock's performance is somewhat inconsistent. However, a closer look at its Earnings Per Share (EPS) (EPS) of 3.54 paints a more stable picture. The question then arises: Is Masco (MAS) modestly undervalued? This article aims to offer a comprehensive valuation analysis to answer this question. Let's delve into the details.
A Snapshot of Masco Corp (MAS, Financial)
Masco Corp (MAS) is a leading manufacturer of home improvement and building products, boasting a diverse portfolio that includes the Delta and Hansgrohe brands in its $5.3 billion plumbing segment and the Behr and Kilz brands in its $3.4 billion decorative architectural segment. With a current stock price of $51.53 and a market cap of $11.60 billion, Masco's value is a topic of interest for many investors.
Understanding the GF Value
The GF Value is an exclusive GuruFocus metric that provides an estimation of a stock's fair value. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to this calculation, Masco (MAS, Financial) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Assessing Financial Strength
Investing in companies with poor financial strength can result in a higher risk of permanent capital loss. Therefore, it's essential to carefully review a company's financial strength before deciding to buy its stock. Masco's cash-to-debt ratio of 0.12 is lower than 84.64% of 1608 companies in the Construction industry, indicating fair financial strength.
Evaluating Profitability and Growth
Investing in profitable companies carries less risk, especially if they have demonstrated consistent profitability over the long term. Masco has been profitable for 10 out of the past 10 years, with an operating margin of 15.55%—better than 86.38% of 1630 companies in the Construction industry. This indicates strong profitability.
Growth is a crucial factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. Masco's 3-year average annual revenue growth of 17.1% ranks better than 82.43% of 1554 companies in the Construction industry.
ROIC vs WACC
By comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC), we can evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. In the past 12 months, Masco's ROIC has been 30.45, while its WACC came in at 8.92.
Conclusion
In conclusion, Masco Corp (MAS, Financial) shows every sign of being modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 66.31% of 1321 companies in the Construction industry. To learn more about Masco stock, you can check out 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.
