The stock of JinkoSolar Holding Co (NYSE:JKS, 30-year Financials) is estimated to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock 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. At its current price of $44.27 per share and the market cap of $2 billion, JinkoSolar Holding Co stock gives every indication of being significantly overvalued. GF Value for JinkoSolar Holding Co is shown in the chart below.
Because JinkoSolar Holding Co is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 1.9% over the past three years and is estimated to grow 14.33% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. JinkoSolar Holding Co has a cash-to-debt ratio of 0.23, which which ranks worse than 88% of the companies in Semiconductors industry. The overall financial strength of JinkoSolar Holding Co is 4 out of 10, which indicates that the financial strength of JinkoSolar Holding Co is poor. This is the debt and cash of JinkoSolar Holding Co over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. JinkoSolar Holding Co has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $5 billion and earnings of $2.244 a share. Its operating margin is 7.02%, which ranks in the middle range of the companies in Semiconductors industry. Overall, GuruFocus ranks the profitability of JinkoSolar Holding Co at 7 out of 10, which indicates fair profitability. This is the revenue and net income of JinkoSolar Holding Co over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of JinkoSolar Holding Co is 1.9%, which ranks in the middle range of the companies in Semiconductors industry. The 3-year average EBITDA growth is -4.5%, which ranks worse than 72% of the companies in Semiconductors industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, JinkoSolar Holding Co's ROIC is 4.67 while its WACC came in at 5.09. The historical ROIC vs WACC comparison of JinkoSolar Holding Co is shown below:
In closing, the stock of JinkoSolar Holding Co (NYSE:JKS, 30-year Financials) gives every indication of being significantly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 72% of the companies in Semiconductors industry. To learn more about JinkoSolar Holding Co stock, you can check out its 30-year Financials here.
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