With a striking daily gain of 25.13% and a 3-month gain of 45.63%, Compania de Minas Buenaventura SAA (BVN, Financial) has certainly caught the attention of investors. The company also reports an Earnings Per Share (EPS) of $0.38. But the pivotal question remains: is the stock significantly overvalued? This article aims to delve into the valuation analysis of Compania de Minas Buenaventura SAA, providing a comprehensive look at its financial standing and market position. Continue reading for an in-depth analysis that may offer valuable insights into the company's valuation.
Company Introduction
Compania de Minas Buenaventura SAA, a seasoned player in the precious metals industry, has been actively involved in exploration, development, construction, and operation of mines in Peru. Despite its current market price of $12.5 per share, the GF Value suggests a fair value of just $8.17, indicating a significant overvaluation in the market. This discrepancy sets the stage for a detailed examination of the company's intrinsic worth, blending financial analysis with key business insights.
Summarize GF Value
The GF Value is a unique metric that pinpoints the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. The GF Value Line is a representation of this fair value estimation, and it serves as a benchmark for what the stock should be ideally trading at.
According to GuruFocus' valuation method, Compania de Minas Buenaventura SAA (BVN, Financial) is significantly overvalued. The GF Value is meticulously calculated, incorporating historical price multiples, an internal adjustment reflecting the company's historical growth, and analyst estimates for future business performance. When a stock's price sits considerably above the GF Value Line, it may be overvalued, potentially leading to poorer future returns. Conversely, a price well below the GF Value Line could indicate undervaluation and the prospect of higher future returns. Currently, at $12.5 per share, Compania de Minas Buenaventura SAA's stock appears to be significantly overvalued.
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Financial Strength
Assessing a company's financial strength is vital before investing in its stock. Companies with weak financial health pose a greater risk of permanent loss. One can gauge financial strength by examining metrics like the cash-to-debt ratio and interest coverage. Compania de Minas Buenaventura SAA's cash-to-debt ratio stands at 0.32, which is lower than 81.04% of its peers in the Metals & Mining industry. The company's overall financial strength scores a 5 out of 10, suggesting that it's in a fair position financially.
Profitability and Growth
Long-term profitability is a key indicator of a company's risk level for investors. Companies with consistently high profit margins are generally considered better investments than those with lower margins. Compania de Minas Buenaventura SAA has been profitable in 2 out of the past 10 years. With a revenue of $816.40 million and an Earnings Per Share (EPS) of $0.38 over the last twelve months, the company's operating margin is -13.66%, ranking lower than 63.58% of the companies in its industry. The overall profitability rank of 3 out of 10 indicates poor profitability.
The growth of a company is often the most critical factor in its valuation. Compania de Minas Buenaventura SAA's 3-year average annual revenue growth rate is -1.7%, which is lower than 77.63% of its competitors in the Metals & Mining industry. However, its 3-year average EBITDA growth rate is an impressive 77.5%, ranking better than 97.02% of the companies in the same industry.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can also reveal its profitability. The ROIC is an indicator of how efficiently a company generates cash flow relative to the capital invested, while the WACC represents the average rate a company pays to finance its assets. Ideally, the ROIC should exceed the WACC to indicate value creation for shareholders. For Compania de Minas Buenaventura SAA, the ROIC is -2.06, and the WACC is 8.74, suggesting that the company is not currently creating value for its shareholders.
Conclusion
In summary, Compania de Minas Buenaventura SAA (BVN, Financial) appears to be significantly overvalued based on its current market price. The company's financial condition is fair, but its profitability is poor. However, its growth is commendable, ranking better than 97.02% of its peers in the Metals & Mining industry. For more detailed financial information on Compania de Minas Buenaventura SAA, you can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
