The stock of Utah Medical Products (NAS:UTMD, 30-year Financials) shows every sign of being 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 $83.51 per share and the market cap of $304.5 million, Utah Medical Products stock shows every sign of being fairly valued. GF Value for Utah Medical Products is shown in the chart below.
Because Utah Medical Products is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 1.2% 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. Utah Medical Products has a cash-to-debt ratio of 170.31, which is better than 85% of the companies in the industry of Medical Devices & Instruments. The overall financial strength of Utah Medical Products is 8 out of 10, which indicates that the financial strength of Utah Medical Products is strong. This is the debt and cash of Utah Medical Products 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. Utah Medical Products has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $42.2 million and earnings of $2.924 a share. Its operating margin of 32.51% better than 91% of the companies in the industry of Medical Devices & Instruments. Overall, GuruFocus ranks Utah Medical Products’s profitability as strong. This is the revenue and net income of Utah Medical Products 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 Utah Medical Products is 1.2%, which ranks in the middle range of the companies in the industry of Medical Devices & Instruments. The 3-year average EBITDA growth rate is -0.8%, which ranks worse than 71% of the companies in the industry of Medical Devices & Instruments.
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, Utah Medical Products’s ROIC was 18.71, while its WACC came in at 2.95. The historical ROIC vs WACC comparison of Utah Medical Products is shown below:
In closing, the stock of Utah Medical Products (NAS:UTMD, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks worse than 71% of the companies in the industry of Medical Devices & Instruments. To learn more about Utah Medical Products stock, you can check out its 30-year Financials here.
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