Shaw Communications Stock Gives Every Indication Of Being Significantly Overvalued
- By GF Value
The stock of Shaw Communications (NYSE:SJR, 30-year Financials) is believed 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 $29.82 per share and the market cap of $14.9 billion, Shaw Communications stock is estimated to be significantly overvalued. GF Value for Shaw Communications is shown in the chart below.
Because Shaw Communications is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 1.9% over the past three years and is estimated to grow 1.49% 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. Shaw Communications has a cash-to-debt ratio of 0.06, which is worse than 87% of the companies in Telecommunication Services industry. The overall financial strength of Shaw Communications is 4 out of 10, which indicates that the financial strength of Shaw Communications is poor. This is the debt and cash of Shaw Communications 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. Shaw Communications has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $4.1 billion and earnings of $1.083 a share. Its operating margin of 22.13% better than 83% of the companies in Telecommunication Services industry. Overall, GuruFocus ranks Shaw Communications's profitability as fair. This is the revenue and net income of Shaw Communications over the past years: