The stock of Westwood Holdings Group (NYSE:WHG, 30-year Financials) is believed 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 $19.61 per share and the market cap of $162.7 million, Westwood Holdings Group stock gives every indication of being fairly valued. GF Value for Westwood Holdings Group is shown in the chart below.
Because Westwood Holdings Group is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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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. Westwood Holdings Group has a cash-to-debt ratio of 12.04, which is in the middle range of the companies in Capital Markets industry. The overall financial strength of Westwood Holdings Group is 7 out of 10, which indicates that the financial strength of Westwood Holdings Group is fair. This is the debt and cash of Westwood Holdings Group over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Westwood Holdings Group has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $66.8 million and loss of $0.76 a share. Its operating margin is 3.09%, which ranks in the middle range of the companies in Capital Markets industry. Overall, GuruFocus ranks the profitability of Westwood Holdings Group at 7 out of 10, which indicates fair profitability. This is the revenue and net income of Westwood Holdings Group over the past years:
Growth is probably one of the most important factors 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. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Westwood Holdings Group’s 3-year average revenue growth rate is worse than 80% of the companies in Capital Markets industry. Westwood Holdings Group’s 3-year average EBITDA growth rate is -67.3%, which ranks in the bottom 10% of the companies in Capital Markets 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, Westwood Holdings Group’s ROIC is 33.27 while its WACC came in at 10.38. The historical ROIC vs WACC comparison of Westwood Holdings Group is shown below:
Overall, The stock of Westwood Holdings Group (NYSE:WHG, 30-year Financials) is estimated to be fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the bottom 10% of the companies in Capital Markets industry. To learn more about Westwood Holdings Group stock, you can check out its 30-year Financials here.
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