Industrias Bachoco SAB de CV Stock Appears To Be Modestly Undervalued

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Apr 03, 2021
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The stock of Industrias Bachoco SAB de CV (NYSE:IBA, 30-year Financials) appears to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $39.6044 per share and the market cap of $2 billion, Industrias Bachoco SAB de CV stock is believed to be modestly undervalued. GF Value for Industrias Bachoco SAB de CV is shown in the chart below.

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Because Industrias Bachoco SAB de CV is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 5.8% over the past five years.

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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Industrias Bachoco SAB de CV has a cash-to-debt ratio of 7.57, which which ranks better than 82% of the companies in the industry of Consumer Packaged Goods. The overall financial strength of Industrias Bachoco SAB de CV is 8 out of 10, which indicates that the financial strength of Industrias Bachoco SAB de CV is strong. This is the debt and cash of Industrias Bachoco SAB de CV over the past years:

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Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Industrias Bachoco SAB de CV has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $3.2 billion and earnings of $3.401 a share. Its operating margin of 6.86% in the middle range of the companies in the industry of Consumer Packaged Goods. Overall, GuruFocus ranks Industrias Bachoco SAB de CV's profitability as fair. This is the revenue and net income of Industrias Bachoco SAB de CV over the past years:

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Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Industrias Bachoco SAB de CV is 5.8%, which ranks in the middle range of the companies in the industry of Consumer Packaged Goods. The 3-year average EBITDA growth rate is -4.1%, which ranks worse than 67% of the companies in the industry of Consumer Packaged Goods.

Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Industrias Bachoco SAB de CV's ROIC was 10.42, while its WACC came in at 7.96. The historical ROIC vs WACC comparison of Industrias Bachoco SAB de CV is shown below:

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In short, the stock of Industrias Bachoco SAB de CV (NYSE:IBA, 30-year Financials) is estimated to be modestly undervalued. The company's financial condition is strong and its profitability is fair. Its growth ranks worse than 67% of the companies in the industry of Consumer Packaged Goods. To learn more about Industrias Bachoco SAB de CV stock, you can check out its 30-year Financials here.

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