The shares of Restaurant Brands NZ (OTCPK: RTBRF, 30-year financial stocks) are rated as fair according to the GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock was traded, past business growth and analyst estimates of future business development. If a stock is well above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is well below the GF Value Line, its future return will likely be higher. With a current price of $ 10.06 per share and a market capitalization of $ 1.3 billion, Restaurant Brands NZ shows all signs of a fair valuation. The GF value for restaurant brands NZ is shown in the following table.
With Restaurant Brands NZ being fairly valued, its stock’s long-term return is likely to be close to business growth, which averaged 21% over the past five years.
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Companies with little financial strength present investors with a high risk of permanent capital loss. To avoid permanent loss of capital, an investor must do research and verify a company’s financial strength before making a decision to buy stocks. Both Cash-to-Debt Ratio and a company’s interest coverage are a great way to understand its financial strength. Restaurant Brands NZ has a cash-to-debt ratio of 0.04, which is in the bottom 10% of companies in the restaurant industry. The overall financial strength of Restaurant Brands NZ is 4 out of 10, which suggests that Restaurant Brands NZ’s financial strength is low. Here is Restaurant Brands NZ’s debts and cash over the past several years:
Investing in profitable companies carries less risk, especially in companies that have consistent long-term profitability. Typically, a company with high profit margins offers better performance potential than one with low profit margins. Restaurant Brands NZ has been profitable for 10 years over the past 10 years. For the past 12 months, the company had sales of $ 608.2 million and earnings of $ 0.17 per share. Its operating margin of 3.03% better than 69% of companies in the hospitality industry. Overall, GuruFocus rates Restaurant Brands NZ’s profitability as fair. This is the revenue and net revenue of Restaurant Brands NZ over the past few years:
Growth is probably the most important factor in evaluating a company. GuruFocus research has shown that growth is closely related to a company’s long-term stock performance. A faster growing company creates more value for shareholders, especially when the growth is profitable. Restaurant Brands NZ average 3 year revenue growth is 21%, which is better than 95% of companies in the restaurant industry. The 3-year average EBITDA growth rate is 8.7%, which is in the middle range for companies in the hospitality industry.
Another way to determine a company’s profitability is to compare the return on invested capital to the weighted average cost of capital. Return on Invested Capital (ROIC) measures how well a company generates a cash flow in relation to the capital invested. The weighted average cost of capital (WACC) is the average rate a company must pay to all of its securityholders to fund its assets. When the ROIC is higher than the WACC, it means the company is creating value for shareholders. Over the past 12 months, the Restaurant Brands return on investment is NZ 1.84 and the cost of capital is 8.05. The historical comparison between ROIC and WACC from Restaurant Brands NZ is shown below:
In summary, Restaurant Brands NZ (OTCPK: RTBRF, 30 Year Financials) stock has every indication that it is fairly valued. The company’s financial condition is poor and profitability is fair. Its growth is in the middle range of companies in the catering industry. To find out more about Restaurant Brands NZ stock, check out 30 year financials here.
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