- By GF Value
The stock of Century Communities (NYSE:CCS, 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 $61.15 per share and the market cap of $2.1 billion, Century Communities stock shows every sign of being significantly overvalued. GF Value for Century Communities is shown in the chart below.
Because Century Communities is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 17.5% over the past three years and is estimated to grow 28.55% annually over the next three to 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. Century Communities has a cash-to-debt ratio of 0.34, which is in the middle range of the companies in Homebuilding & Construction industry. The overall financial strength of Century Communities is 4 out of 10, which indicates that the financial strength of Century Communities is poor. This is the debt and cash of Century Communities over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Century Communities has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $3.2 billion and earnings of $6.13 a share. Its operating margin is 8.69%, which ranks in the middle range of the companies in Homebuilding & Construction industry. Overall, the profitability of Century Communities is ranked 7 out of 10, which indicates fair profitability. This is the revenue and net income of Century Communities over the past years: