By GF Value The stock of White Mountains Insurance Group (NYSE:WTM, 30-year Financials) gives every indication of being possible value trap, according to GuruFocus Value calculation.
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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 $1155.65 per share and the market cap of $3.6 billion, White Mountains Insurance Group stock appears to be possible value trap.
White Mountains Insurance Group Stock Is Estimated To Be Possible Value Trap
White Mountains Insurance Group Stock Is Estimated To Be Possible Value Trap The reason we think that White Mountains Insurance Group stock might be a value trap is because Link: These companies may deliever higher future returns at reduced risk. Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. White Mountains Insurance Group has a cash-to-debt ratio of 0.56, which which ranks worse than 78% of the companies in Insurance industry. The overall financial strength of White Mountains Insurance Group is 6 out of 10, which indicates that the financial strength of White Mountains Insurance Group is fair.
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This is the debt and cash of White Mountains Insurance Group over the past years: Story continues White Mountains Insurance Group Stock Is Estimated To Be Possible Value Trap 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. White Mountains Insurance Group has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $1.2 billion and earnings of $229.39 a share. Its operating margin is 0.00%, which ranks in the bottom 10% of the companies in Insurance industry. Overall, GuruFocus ranks the profitability of White Mountains Insurance Group at 6 out of 10, which indicates fair profitability. This is the revenue and net income of White Mountains Insurance Group over the past years: White Mountains Insurance Group Stock Is Estimated To Be Possible Value Trap Growth is probably the most important factor 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. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of White Mountains Insurance Group is 63.2%, which ranks better than 98% of the companies in Insurance industry. The 3-year average EBITDA growth rate is 212.1%, which ranks better than 99% 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.
White Mountains Insurance Group Stock Is Estimated To Be Possible Value Trap
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, White Mountains Insurance Group's return on invested capital is 17.87, and its cost of capital is 5.10. The historical ROIC vs WACC comparison of White Mountains Insurance Group is shown below: White Mountains Insurance Group Stock Is Estimated To Be Possible Value Trap In short, The stock of White Mountains Insurance Group (NYSE:WTM, 30-year Financials) shows every sign of being possible value trap. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 99% of the companies in Insurance industry. To learn more about White Mountains Insurance Group stock, you can check out its 30-year Financials here. To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener. This article first appeared on GuruFocus.
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