Amidst the daily fluctuations of the stock market, Middlesex Water Co (MSEX, Financial) has experienced a slight decrease of 1.5% in its stock price, with a marginal 3-month change of -0.29%. Despite this, the company boasts an Earnings Per Share (EPS) of 1.84. Investors are keen to understand whether these figures suggest that Middlesex Water Co (MSEX) is modestly undervalued. The following valuation analysis seeks to shed light on this question and provide a clearer picture of the company's stock value.
Company Introduction
Middlesex Water Co owns and operates regulated water and wastewater systems, mainly in New Jersey, Delaware, and Pennsylvania. With a focus on residential customers, the company's revenue is predominantly derived from its Regulated segment. When compared to its current stock price of $67.73, the GF Value of $95.69 suggests that Middlesex Water Co (MSEX, Financial) may be modestly undervalued. This valuation presents an opportunity for investors to explore the potential for long-term gains. The company's financial performance is illustrated in the income breakdown chart linked below.
Summarize GF Value
The GF Value is a measure of intrinsic value that incorporates historical trading multiples, an internal adjustment factor based on past performance, and future business performance estimates. If a stock is trading significantly above this value, it may be overvalued and could lead to lower future returns. Conversely, if it's trading below, it could indicate undervaluation and the potential for higher returns. Given its current price, Middlesex Water Co (MSEX, Financial) is considered modestly undervalued, suggesting that the stock might offer higher long-term returns than its business growth alone would indicate.
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Financial Strength
Investing in companies with robust financial strength mitigates the risk of capital loss. Middlesex Water Co's cash-to-debt ratio of 0.01 is lower than 96.04% of its peers in the Utilities - Regulated industry, indicating a weaker financial position. The company's overall financial strength is rated at 4 out of 10 by GuruFocus, suggesting that investors should exercise caution. The historical debt and cash data for Middlesex Water Co are available in the chart linked below.
Profitability and Growth
Middlesex Water Co has maintained profitability for the past decade, with an impressive operating margin of 23.5%, ranking it above 78.17% of its industry counterparts. The company's profitability is strong, with a ranking of 8 out of 10. In terms of growth, the 3-year average annual revenue growth rate of 4.7% is modest, while the EBITDA growth rate of 13.5% is more competitive, outperforming 73.09% of the industry.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) is crucial in assessing profitability. Middlesex Water Co's ROIC of 3.36 is below its WACC of 9.23, indicating that the company may not be generating adequate returns on its investments. The historical comparison of ROIC vs. WACC for Middlesex Water Co is depicted in the chart below.
Conclusion
Overall, Middlesex Water Co (MSEX, Financial) appears to be modestly undervalued. The company's financial condition is a concern, yet its profitability remains strong. Its growth is commendable, surpassing a significant portion of the industry. For a more detailed financial overview, investors can review the 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.
