GNUS Stock – Genius Brands International Stock Gives Every Indication Of Being Significantly Overvalued
– By GF Value
The stock of Genius Brands International (NAS:GNUS, 30-year Financials) is estimated 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 $2.07 per share and the market cap of $620 million, Genius Brands International stock gives every indication of being significantly overvalued. GF Value for Genius Brands International is shown in the chart below.
Because Genius Brands International is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 30.9% over the past five years.
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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. Genius Brands International has a cash-to-debt ratio of 12.24, which is better than 77% of the companies in the industry of Media – Diversified. The overall financial strength of Genius Brands International is 4 out of 10, which indicates that the financial strength of Genius Brands International is poor. This is the debt and cash of Genius Brands International over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Genius Brands International has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $1.9 million and loss of $5.3 a share. Its operating margin is -495.06%, which ranks in the bottom 10% of the companies in the industry of Media – Diversified. Overall, the profitability of Genius Brands International is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Genius Brands International over the past years:
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 stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Genius Brands International is 30.9%, which ranks better than 91% of the companies in the industry of Media – Diversified. The 3-year average EBITDA growth rate is 23.2%, which ranks better than 77% of the companies in the industry of Media – Diversified.
Another way to evaluate a company’s profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Genius Brands International’s ROIC was -31.00, while its WACC came in at 13.71. The historical ROIC vs WACC comparison of Genius Brands International is shown below:
To conclude, the stock of Genius Brands International (NAS:GNUS, 30-year Financials) shows every sign of being significantly overvalued. The company’s financial condition is poor and its profitability is poor. Its growth ranks better than 77% of the companies in the industry of Media – Diversified. To learn more about Genius Brands International stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.