- By GF Value
The stock of Autohome (NYSE:ATHM, 30-year Financials) is estimated to be possible value trap, 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 $95.11 per share and the market cap of $11.9 billion, Autohome stock is estimated to be possible value trap. GF Value for Autohome is shown in the chart below.
The reason we think that Autohome stock might be a value trap is because
Link: These companies may deliever higher future returns at reduced risk.
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. Autohome has a cash-to-debt ratio of 72.17, which which ranks better than 73% of the companies in Interactive Media industry. The overall financial strength of Autohome is 8 out of 10, which indicates that the financial strength of Autohome is strong. This is the debt and cash of Autohome 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. Autohome has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.3 billion and earnings of $4.166 a share. Its operating margin is 36.36%, which ranks better than 91% of the companies in Interactive Media industry. Overall, the profitability of Autohome is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Autohome 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 Autohome is 11.1%, which ranks in the middle range of the companies in Interactive Media industry. The 3-year average EBITDA growth rate is 15.1%, which ranks in the middle range of the companies in Interactive Media industry.