Green Plains Inc (GPRE, Financial) saw a daily gain of 3.96%, with a 2.06% increase over the last three months. Despite a Loss Per Share of 4.02, the question remains: is the stock fairly valued? In this article, we will delve into an in-depth valuation analysis of Green Plains (GPRE) to answer this question. Let's explore.
Unveiling Green Plains Inc (GPRE, Financial)
Green Plains Inc, a leading ethanol and ethanol byproducts manufacturer, operates in three segments: ethanol production, agribusiness and energy services, and partnership. The ethanol production segment generates the majority of the company's revenue, producing ethanol, grains, and corn oil. The agribusiness and energy services segment includes grain procurement and commodity marketing, distributing ethanol, distillers grains, and corn oil. The partnership segment provides fuel storage and transportation services. With a stock price of $32.79 and a GF Value of $31.74, Green Plains appears to be fairly valued at a market cap of $2 billion.
Understanding the GF Value
The GF Value is an exclusive valuation method that calculates a stock's intrinsic value. It considers historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value. If the stock price significantly deviates from the GF Value Line, it indicates the stock is either overvalued or undervalued, influencing its future return.
Based on our analysis, Green Plains (GPRE, Financial) appears to be fairly valued. This suggests that the long-term return of its stock is likely to align with the rate of its business growth.
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Financial Strength of Green Plains
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to understand a company's financial strength before investing. For Green Plains, the cash-to-debt ratio stands at 0.39, which is lower than 64.32% of the companies in the Chemicals industry. With an overall financial strength rank of 6 out of 10, Green Plains' financial strength is considered fair.
Profitability and Growth
Investing in profitable companies typically carries less risk. Green Plains has been profitable for 6 out of the past 10 years. Despite annual revenues of $3.60 billion in the past 12 months, the company reported a Loss Per Share of $4.02. With an operating margin of -5.17%, Green Plains' profitability is ranked as poor.
Company growth is a crucial factor in valuation. The 3-year average annual revenue growth of Green Plains is 1.3%, ranking lower than 75.74% of the companies in the Chemicals industry. The 3-year average EBITDA growth rate is 0%, ranking lower than all companies in the Chemicals industry.
ROIC vs. WACC
Another way to determine a company's profitability is to compare its return on invested capital (ROIC) with its weighted average cost of capital (WACC). The ROIC of Green Plains for the past 12 months is -12.38, while its WACC is 9.45. This suggests that the company is not creating value for shareholders.
Conclusion
In conclusion, Green Plains (GPRE, Financial) stock appears to be fairly valued. Its financial condition is fair, but its profitability is poor. Its growth ranks lower than all companies in the Chemicals industry. To learn more about Green Plains stock, check out its 30-Year Financials here.
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