KT Corp (KT, Financial) experienced a daily loss of 2.64%, with a modest 3-month gain of 0.55%. The company reported Earnings Per Share (EPS) (EPS) of $1.84. The question that begs to be answered is: Is KT's stock fairly valued? This article will provide an in-depth analysis of KT's valuation to help you make an informed investment decision.
Introducing KT Corp (KT, Financial)
As South Korea's largest fixed-line telecom operator, KT Corp (KT) serves around 13 million customers. It is the country's largest broadband firm with 9.8 million customers and the second-largest wireless operator with 24.6 million subscribers. KT also has 9.5 million IPTV customers and about 30 non-telecom businesses, including artificial intelligence and IDC/cloud services. With a current price of $11.8 per share and a market cap of $5.80 billion, KT's stock appears to be fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure that indicates the intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
KT Corp (KT, Financial) appears to be fairly valued based on the GF Value calculation. The company's current price of $11.8 per share suggests that the stock is trading at a fair value. Therefore, the long-term return of its stock is likely to be close to the rate of its business growth.
KT's Financial Strength
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. One way to understand a company's financial strength is by looking at its cash-to-debt ratio and interest coverage. KT has a cash-to-debt ratio of 0.31, which is better than 50.13% of the companies in the Telecommunication Services industry. The overall financial strength of KT is 6 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. KT has been profitable 8 out of the past 10 years. Over the past twelve months, the company had a revenue of $19.70 billion and an Earnings Per Share (EPS) (EPS) of $1.84. Its operating margin is 6.98%, which ranks worse than 58.81% of the companies in the Telecommunication Services industry. Overall, the profitability of KT is ranked 6 out of 10, indicating fair profitability.
Growth is one of the most important factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of KT is 1.7%, which ranks worse than 56.61% of companies in the Telecommunication Services industry. The 3-year average EBITDA growth is 6.4%, which ranks better than 56.29% of companies in the industry.
ROIC vs WACC
A comparison of a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can provide insight into its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The 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, KT's ROIC is 4.48, and its WACC is 3.96.
Conclusion
In conclusion, KT Corp (KT, Financial) stock appears to be fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 56.29% of 334 companies in the Telecommunication Services industry. To learn more about KT stock, you can check out its 30-Year Financials here.
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