Camping World Holdings (NYSE: CWH, 30-year financials) is showing all signs of significant overvaluation, according to GuruFocus value calculations. The GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should be traded. The calculation is based on the historical multiples at which the share traded, past business growth and analyst estimates of future business development. If a stock’s price is well above the GF value line, it is overvalued and its future return is likely to be poor. On the other hand, if it is well below the GF value line, its future return will likely be higher. At a current price of $ 36.92 per share and a market cap of $ 3.3 billion, Camping World Holdings stock appears to be significantly overvalued. The GF value for Camping World Holdings is shown in the table below.
With Camping World Holdings being significantly overvalued, the long-term return on its stocks is likely to be well below future business growth, which is set to grow 5.93% annually for the next three to five years.
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It is always important to check a company’s financial strength before buying its stocks. Investing in companies with low financial strength has a higher risk of permanent losses. Looking at the cash-to-debt ratio and interest coverage is a great way to understand a company’s financial strength. Camping World Holdings has a cash-to-debt ratio of 0.06, which is in the bottom 10% of companies in the vehicle and parts industry. Camping World Holdings ‘overall financial strength is 4 out of 10, which indicates that Camping World Holdings’ financial strength is poor. This is Camping World Holdings’ debt and money over the past few years:
Companies that have been consistently profitable over the long term offer less risk to investors who may want to buy stocks. Higher profit margins usually require a better investment compared to a company with lower profit margins. Camping World Holdings has been profitable 7 over the past 10 years. For the past twelve months, the company had sales of $ 5.4 billion and earnings of $ 3.1 per share. The operating margin is 9.08%, which is over 79% of companies in the vehicle and parts industry. Overall, Camping World Holdings’ profitability ranks 7th out of 10, which indicates fair profitability. This is Camping World Holdings’ sales and net income over the past few years:
Growth is probably the most important factor in evaluating a company. Research by GuruFocus has shown that growth is closely related to the long-term performance of a company’s stocks. The faster a company grows, the more likely it is to create value for shareholders, especially if the growth is profitable. Camping World Holdings’ average 3 year annual revenue growth rate is -5.4%, which is worse than 77% of companies in the vehicle and parts industry. The average 3 year EBITDA growth rate is -10.3%, which is worse than 70% of companies in the vehicle and parts industry.
Another way to evaluate a company’s profitability is to compare its return on investment (ROIC) to its weighted cost of capital (WACC). Return on Invested Capital (ROIC) measures how well a company generates cash flow in relation to the capital it has invested in its business. The weighted average cost of capital (WACC) is the average rate that a company is expected to pay to all securityholders to fund its assets. When the ROIC is higher than the WACC, it means the company is creating value for shareholders. For the past 12 months, Camping World Holdings’ ROIC was 15.17 while the WACC was 13.45. Camping World Holdings’ historical comparison of ROIC and WACC is shown below:
To sum up, Camping World Holdings (NYSE: CWH, 30-year financials) stocks are vastly overvalued. The company’s financial situation is poor and profitability is fair. The growth is below 70% of companies in the vehicle and parts industry. To find out more about Camping World Holdings stock, check out 30 year financials here.
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