In This Article:
- By GF Value
The stock of Tronox Holdings PLC (NYSE:TROX, 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 $22.59 per share and the market cap of $3.5 billion, Tronox Holdings PLC stock is estimated to be significantly overvalued. GF Value for Tronox Holdings PLC is shown in the chart below.
Because Tronox Holdings PLC is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 10.2% over the past three years and is estimated to grow 12.49% annually over the next three to 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. Tronox Holdings PLC has a cash-to-debt ratio of 0.18, which is worse than 83% of the companies in Chemicals industry. GuruFocus ranks the overall financial strength of Tronox Holdings PLC at 3 out of 10, which indicates that the financial strength of Tronox Holdings PLC is poor. This is the debt and cash of Tronox Holdings PLC 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. Tronox Holdings PLC has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $2.9 billion and earnings of $6.58 a share. Its operating margin is 9.93%, which ranks in the middle range of the companies in Chemicals industry. Overall, GuruFocus ranks the profitability of Tronox Holdings PLC at 4 out of 10, which indicates poor profitability. This is the revenue and net income of Tronox Holdings PLC over the past years: