In This Article:
- By GF Value
The stock of Ameriprise Financial (NYSE:AMP, 30-year Financials) appears 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 $232.8 per share and the market cap of $27.1 billion, Ameriprise Financial stock is estimated to be significantly overvalued. GF Value for Ameriprise Financial is shown in the chart below.
Because Ameriprise Financial is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 7% over the past three years and is estimated to grow 3.07% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Ameriprise Financial has a cash-to-debt ratio of 1.39, which ranks in the middle range of the companies in Asset Management industry. Based on this, GuruFocus ranks Ameriprise Financial's financial strength as 4 out of 10, suggesting poor balance sheet. This is the debt and cash of Ameriprise Financial over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Ameriprise Financial has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $12 billion and earnings of $11.9 a share. Its operating margin of 0.00% in the bottom 10% of the companies in Asset Management industry. Overall, GuruFocus ranks Ameriprise Financial's profitability as fair. This is the revenue and net income of Ameriprise Financial over the past years: