The stock of AXA SA (OTCPK:AXAHY, 30-year Financials) appears to be fairly valued, 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 $27.86 per share and the market cap of $66.5 billion, AXA SA stock shows every sign of being fairly valued. GF Value for AXA SA is shown in the chart below.
Because AXA SA is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 1.3% over the past five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. AXA SA has a cash-to-debt ratio of 1.45, which is in the middle range of the companies in Insurance industry. The overall financial strength of AXA SA is 5 out of 10, which indicates that the financial strength of AXA SA is fair. This is the debt and cash of AXA SA over the past years:
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. AXA SA has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $113.8 billion and earnings of $1.286 a share. Its operating margin of 0.00% in the bottom 10% of the companies in Insurance industry. Overall, GuruFocus ranks AXA SA's profitability as fair. This is the revenue and net income of AXA SA over the past years:
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 stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of AXA SA is 1.3%, which ranks in the middle range of the companies in Insurance industry. The 3-year average EBITDA growth rate is -6.4%, which ranks in the middle range of the companies in Insurance industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, AXA SA's ROIC is 0.52 while its WACC came in at 7.01. The historical ROIC vs WACC comparison of AXA SA is shown below:
In closing, AXA SA (OTCPK:AXAHY, 30-year Financials) stock shows every sign of being fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range of the companies in Insurance industry. To learn more about AXA SA stock, you can check out its 30-year Financials here.
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