Today, we examine the financial performance and intrinsic value of Suzano SA (SUZ, Financial), a leading producer and seller of pulp and a variety of paper products. The stock has seen a daily gain of 3.8%, a 3-month gain of 13.94%, and boasts an Earnings Per Share (EPS) (EPS) of 3.45. The question we aim to answer is: Is Suzano SA modestly undervalued? Let's delve into the valuation analysis to find out.
Suzano SA: A Snapshot
Suzano SA, with a market cap of $14.40 billion, operates in two segments: Pulp and Paper, with the former generating the majority of revenue. The company's product portfolio includes printing and writing paper, paperboard, diapers, and sanitary napkins. It owns forest land and plants in Brazil, where it harvests timber and turns the timber into pulp and paper. Europe is its largest market.
Suzano SA's GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
According to GuruFocus, Suzano SA appears to be modestly undervalued. The GF Value estimates the stock's fair value at $14.57, based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $11.2 per share, Suzano SA stock appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Suzano SA has a cash-to-debt ratio of 0.25, which ranks worse than 59.12% of 274 companies in the Forest Products industry. Based on this, GuruFocus ranks Suzano SA's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk. Suzano SA has been profitable 5 years over the past 10 years. During the past 12 months, the company had revenues of $9.50 billion and an EPS of $3.45. Its operating margin of 41.61% is better than 99.65% of 287 companies in the Forest Products industry. GuruFocus ranks Suzano SA's profitability as fair.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Suzano SA is 24.8%, which ranks better than 90.25% of 277 companies in the Forest Products industry. The 3-year average EBITDA growth is 75.1%, which ranks better than 93.8% of 242 companies in the Forest Products industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Suzano SA's ROIC was 15.28, while its WACC came in at 5.48.
Conclusion
Overall, Suzano SA (SUZ, Financial) stock appears to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 93.8% of 242 companies in the Forest Products industry. To learn more about Suzano SA stock, you can check out its 30-Year Financials here.
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