On May 28, 2024, Wolverine World Wide Inc (WWW, Financial) experienced a daily gain of 4.5%, contributing to a substantial three-month gain of 37.35%. Despite these impressive short-term gains, a deeper look into the company's financials reveals a Loss Per Share of $0.93. This analysis seeks to determine whether Wolverine World Wide is modestly overvalued by comparing its current stock price of $14.06 to the GF Value of $12.39.
Company Overview
Wolverine World Wide, with a market cap of $1.10 billion, designs, manufactures, and distributes branded footwear, apparel, and accessories. Its business is segmented into Active Group, Work Group, Lifestyle Group, and Others, with the Active Group being the most revenue-generating segment. This includes brands like Merrell and Saucony. Below is the income breakdown of Wolverine World Wide:
Understanding GF Value
The GF Value is a proprietary measure calculated based on historical trading multiples, a GuruFocus adjustment factor from past performance, and future business performance estimates. This value suggests a fair trading price for the stock. Currently, Wolverine World Wide's stock price is above this value, indicating it might be modestly overvalued. The potential for future returns may be lower as a result of this overvaluation.
Financial Strength and Stability
Investing in companies with robust financial strength is crucial to avoid potential capital loss. Wolverine World Wide's cash-to-debt ratio is 0.17, ranking below many peers in the industry. This suggests a weaker financial position, which could impact its ability to weather economic downturns. The following chart shows the company's debt and cash over recent years:
Profitability and Growth Prospects
While Wolverine World Wide has maintained profitability over the past decade, its operating margin of 0.22% is lower than many competitors. However, its 3-year average revenue growth rate is commendable, better than 58.75% of industry peers, indicating potential for future value creation.
Comparative Analysis of ROIC and WACC
Assessing a company's value creation efficiency, Wolverine World Wide's return on invested capital (ROIC) is 0.12, compared to a weighted average cost of capital (WACC) of 7.18. Ideally, a company's ROIC should exceed its WACC to indicate efficient value creation. The chart below provides a historical comparison:
Final Thoughts
Although Wolverine World Wide shows signs of modest overvaluation, its growth and market position could offer long-term benefits. Investors should weigh its current valuation against these growth prospects. For a detailed financial analysis, visit Wolverine World Wide's 30-Year Financials.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
