Great Lakes Dredge & Dock Stock Is Believed To Be Significantly Overvalued
- By GF Value
The stock of Great Lakes Dredge & Dock (NAS:GLDD, 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 $15 per share and the market cap of $981.8 million, Great Lakes Dredge & Dock stock appears to be significantly overvalued. GF Value for Great Lakes Dredge & Dock is shown in the chart below.
Because Great Lakes Dredge & Dock is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 4.9% over the past five years.
Link: These companies may deliever higher future returns at reduced risk.
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Great Lakes Dredge & Dock has a cash-to-debt ratio of 0.56, which is in the middle range of the companies in Construction industry. GuruFocus ranks the overall financial strength of Great Lakes Dredge & Dock at 5 out of 10, which indicates that the financial strength of Great Lakes Dredge & Dock is fair. This is the debt and cash of Great Lakes Dredge & Dock 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. Great Lakes Dredge & Dock has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $733.6 million and earnings of $1.01 a share. Its operating margin is 14.79%, which ranks better than 86% of the companies in Construction industry. Overall, the profitability of Great Lakes Dredge & Dock is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of Great Lakes Dredge & Dock over the past years: