Today, we delve into the valuation of WisdomTree Inc (WT, Financial), a financial innovator with a diverse suite of exchange-traded products (ETPs), models, and solutions. WisdomTree's stock has seen a gain of 3.85% on the day and a 2.67% increase over the last three months. Its Earnings Per Share (EPS) stands at 0.72. These metrics raise the question: Is the stock modestly overvalued?
We invite you to join us in this comprehensive analysis of WisdomTree's valuation. Let's begin by taking a closer look at the company and its operations.
Introducing WisdomTree Inc (WT, Financial)
WisdomTree Inc is a pioneer in the financial sector, offering a broad range of ETFs and exchange-traded products (ETPs). The firm is also involved in developing next-generation digital products and structures, including digital funds and tokenized assets, as well as its blockchain-native digital wallet, WisdomTree Prime. Currently, WisdomTree's stock is trading at $7.01 per share, with a market cap of $1.10 billion.
Here's an income breakdown of WisdomTree:
Understanding WisdomTree's GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
If the stock price 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. WisdomTree's current stock price shows signs of being modestly overvalued, indicating that the long-term return of its stock is likely to be lower than its business growth.
Financial Strength of WisdomTree
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. WisdomTree's cash-to-debt ratio stands at 0.24, which is lower than 75.07% of 1472 companies in the Asset Management industry. Its overall financial strength is fair, with a rating of 6 out of 10.
Here's a look at WisdomTree's debt and cash over the past years:
Profitability and Growth of WisdomTree
Investing in profitable companies carries less risk, especially in those that have demonstrated consistent profitability over the long term. WisdomTree has been profitable 8 years over the past 10 years, with an operating margin of 24.12%, which is better than 60.1% of 604 companies in the Asset Management industry. GuruFocus ranks WisdomTree's profitability as strong.
Growth is a critical factor in a company's valuation. WisdomTree's 3-year average annual revenue growth is 2.6%, which ranks lower than 53.39% of 886 companies in the Asset Management industry. However, its 3-year average EBITDA growth rate is 50.8%, ranking better than 81.39% of 462 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 also provide insights into its profitability. WisdomTree's ROIC stands at 8.27 while its WACC is at 9.49. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders.
Here's a historical comparison of WisdomTree's ROIC and WACC:
Conclusion
In conclusion, WisdomTree's stock shows signs of being modestly overvalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 81.39% of 462 companies in the Asset Management industry. To learn more about WisdomTree's stock, you can check out its 30-Year Financials here.
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