WisdomTree Inc (WT, Financial) has recently seen a daily gain of 5.19% and a 3-month gain of 6.1%. The company's Earnings Per Share (EPS) (EPS) stands at 0.72. However, the burning question remains: Is the stock modestly overvalued? This article aims to explore this question in depth. We invite you to delve into our comprehensive analysis to gain a better understanding of WisdomTree's valuation.
Company Introduction
WisdomTree Inc is a financial innovator, offering a well-diversified suite of exchange-traded products (ETPs), models, and solutions. It offers a broad range of ETFs and exchange-traded products (ETPs). The firm also engages in developing next-generation digital products and structures, including digital funds and tokenized assets, as well as its blockchain-native digital wallet, WisdomTree Prime.
The company's stock price currently stands at $7.29 per share, with a market cap of $1.10 billion. However, the GF Value, an estimation of the stock's fair value, is $6.17. This discrepancy raises questions about the company's intrinsic value, which we will explore in this article.
Understanding GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
The GF Value Line, displayed on our summary page, provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is considered overvalued and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, it is considered undervalued and its future return will likely be higher.
Based on our valuation methodology, WisdomTree (WT, Financial) appears to be modestly overvalued. As a result, the long-term return of its stock is likely to be lower than its business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. It's crucial to review a company's financial health before deciding to invest. WisdomTree's cash-to-debt ratio is 0.24, which is worse than 74.92% of 1487 companies in the Asset Management industry, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. WisdomTree has been profitable 8 out of the past 10 years. Its operating margin is 24.12%, which ranks better than 60.23% of 616 companies in the Asset Management industry, indicating strong profitability.
Growth is a crucial factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. WisdomTree's 3-year average annual revenue growth is 2.6%, which ranks worse than 53.58% of 894 companies in the Asset Management industry. However, its 3-year average EBITDA growth rate is 50.8%, which ranks better than 80.94% of 467 companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, WisdomTree's ROIC was 8.27, while its WACC came in at 9.3.
Conclusion
In conclusion, WisdomTree (WT, Financial) appears to be modestly overvalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 80.94% of 467 companies in the Asset Management industry. To learn more about WisdomTree stock, you can check out its 30-Year Financials here.
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