The stock of Fortress Transportation and Infrastructure Investo (NYSE:FTAI, 30-year Financials) gives every indication of being 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 $34.5 per share and the market cap of $3 billion, Fortress Transportation and Infrastructure Investo stock shows every sign of being significantly overvalued. GF Value for Fortress Transportation and Infrastructure Investo is shown in the chart below.
Because Fortress Transportation and Infrastructure Investo is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 20.4% over the past five years.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Fortress Transportation and Infrastructure Investo has a cash-to-debt ratio of 0.08, which is worse than 89% of the companies in Business Services industry. The overall financial strength of Fortress Transportation and Infrastructure Investo is 3 out of 10, which indicates that the financial strength of Fortress Transportation and Infrastructure Investo is poor. This is the debt and cash of Fortress Transportation and Infrastructure Investo over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Fortress Transportation and Infrastructure Investo has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $330.8 million and loss of $1.58 a share. Its operating margin is 5.90%, which ranks in the middle range of the companies in Business Services industry. Overall, the profitability of Fortress Transportation and Infrastructure Investo is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Fortress Transportation and Infrastructure Investo over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Fortress Transportation and Infrastructure Investo is 20.4%, which ranks better than 90% of the companies in Business Services industry. The 3-year average EBITDA growth rate is 13.8%, which ranks better than 68% of the companies in Business Services industry.
Another way to evaluate a company’s profitability is to compare its return on invested capital (ROIC) to its weighted 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 ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Fortress Transportation and Infrastructure Investo’s ROIC was 0.59, while its WACC came in at 10.55. The historical ROIC vs WACC comparison of Fortress Transportation and Infrastructure Investo is shown below:
In summary, The stock of Fortress Transportation and Infrastructure Investo (NYSE:FTAI, 30-year Financials) appears to be significantly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks better than 68% of the companies in Business Services industry. To learn more about Fortress Transportation and Infrastructure Investo stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
