- By GF Value
The stock of Schweitzer-Mauduit International (NYSE:SWM, 30-year Financials) appears to be modestly 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 $41.6 per share and the market cap of $1.3 billion, Schweitzer-Mauduit International stock appears to be modestly overvalued. GF Value for Schweitzer-Mauduit International is shown in the chart below.
Because Schweitzer-Mauduit International is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 2.4% 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. Schweitzer-Mauduit International has a cash-to-debt ratio of 0.10, which is worse than 75% of the companies in Forest Products industry. GuruFocus ranks the overall financial strength of Schweitzer-Mauduit International at 4 out of 10, which indicates that the financial strength of Schweitzer-Mauduit International is poor. This is the debt and cash of Schweitzer-Mauduit International over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Schweitzer-Mauduit International has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.1 billion and earnings of $2.62 a share. Its operating margin is 12.87%, which ranks better than 83% of the companies in Forest Products industry. Overall, GuruFocus ranks the profitability of Schweitzer-Mauduit International at 8 out of 10, which indicates strong profitability. This is the revenue and net income of Schweitzer-Mauduit International over the past years: