Recently, GD Culture Group Ltd (GDC, Financial) has seen a daily gain of 62.6%. However, it has experienced a 3-month loss of -8.78%, which is accompanied by a Loss Per Share of 9.5. This raises the question: Is the stock significantly undervalued? In this article, we will explore the intrinsic value of GD Culture Group (GDC) to answer this question. So, let's dive into the analysis.
Company Introduction
GD Culture Group Ltd is a holding company with no material operations of its own. It conducts business through Shanghai Highlight Media Co. Ltd. Highlight Media, an integrated marketing service agency, focuses on serving businesses in China in connection with brand management, image building, public relations, social media management, and event planning. With a current stock price of $4.13 per share, GD Culture Group has a market cap of $12.60 million. The company's intrinsic value, according to the GF Value, is estimated to be $22.05. This suggests that the stock might be significantly undervalued.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor, and future estimates of business performance. The GF Value Line provides an overview of the stock's fair trading value. 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 the GF Value, GD Culture Group (GDC, Financial) appears to be significantly undervalued. This implies that the long-term return of GD Culture Group's stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's vital to review a company's financial strength before deciding to purchase shares. GD Culture Group has a cash-to-debt ratio of 211.46, which ranks better than 75.44% of 566 companies in the Interactive Media industry. The overall financial strength of GD Culture Group is 10 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. GD Culture Group has been profitable 3 times over the past 10 years. However, its operating margin is -104.6%, which ranks worse than 88.74% of 586 companies in the Interactive Media industry. This indicates poor profitability.
Growth is a crucial factor in the valuation of a company. GD Culture Group's 3-year average revenue growth rate is worse than 99.61% of 514 companies in the Interactive Media industry. Its 3-year average EBITDA growth rate is -11.7%, ranking worse than 73.52% of companies in the industry. This indicates poor growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) can provide insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, ROIC should be higher than WACC. For the past 12 months, GD Culture Group's ROIC is -5.16, and its WACC is 7.33.
Conclusion
In conclusion, the stock of GD Culture Group appears to be significantly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks worse than 73.52% of 389 companies in the Interactive Media industry. To learn more about GD Culture Group stock, you can check out its 30-Year Financials here.
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