IDI Insurance Co Stock Is Estimated To Be Fairly Valued
- By GF Value
The stock of IDI Insurance Co (XTAE:IDIN, 30-year Financials) appears to be fairly valued, 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 ILS 126 per share and the market cap of ILS 1.8 billion, IDI Insurance Co stock appears to be fairly valued. GF Value for IDI Insurance Co is shown in the chart below.
Because IDI Insurance Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. IDI Insurance Co has a cash-to-debt ratio of 0.62, which ranks worse than 73% of the companies in Insurance industry. Based on this, GuruFocus ranks IDI Insurance Co's financial strength as 5 out of 10, suggesting fair balance sheet. This is the debt and cash of IDI Insurance Co 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. IDI Insurance Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of ILS 2.5 billion and earnings of ILS 14.13 a share. Its operating margin is 0.00%, which ranks in the bottom 10% of the companies in Insurance industry. Overall, the profitability of IDI Insurance Co is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of IDI Insurance Co over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. IDI Insurance Co's 3-year average revenue growth rate is worse than 77% of the companies in Insurance industry. IDI Insurance Co's 3-year average EBITDA growth rate is 3.1%, which ranks in the middle range of the companies in Insurance industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, IDI Insurance Co's return on invested capital is 4.67, and its cost of capital is 5.98. The historical ROIC vs WACC comparison of IDI Insurance Co is shown below:
In short, the stock of IDI Insurance Co (XTAE:IDIN, 30-year Financials) is believed to be fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks in the middle range of the companies in Insurance industry. To learn more about IDI Insurance Co stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.