Imperial Brands PLC Stock App

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The stock of Imperial Brands PLC (OTCPK: IMBBY, 30-year Financials) appears to be significantly overvalued, according to GuruFocus Value’s calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, the company’s past growth, and analysts’ estimates of the company’s future performance. If a share’s price is significantly above the GF value line, it is overvalued and its future performance may be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 22.72 per share and market cap of $ 21.5 billion, Imperial Brands PLC stock is estimated to be significantly overvalued. The GF value for Imperial Brands PLC is shown in the table below.

Given that Imperial Brands PLC is significantly overvalued, the long-term performance of its shares will likely be much lower than the future growth of its business, which has averaged 2.9% over the past five years.

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It is always important to check the financial strength of a company before buying its shares. Investing in companies with low financial strength presents 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 business. Imperial Brands PLC has a cash-to-debt ratio of 0.07, which is worse than 85% of companies in the tobacco products sector. The overall financial strength of Imperial Brands PLC is 4 out of 10, which indicates that the financial strength of Imperial Brands PLC is weak. Here is Imperial Brands PLC’s debt and cash flow over the past few years:

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Investing in profitable businesses carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a business with high profit margins offers better performance potential than a business with low profit margins. Imperial Brands PLC has been profitable 10 years in the past 10 years. In the past 12 months, the company reported sales of $ 44.8 billion and earnings of $ 3.977 per share. Its 10.00% operating margin is in the mid-range for companies in the Tobacco Products industry. Overall, GuruFocus rates Imperial Brands PLC’s profitability as fair. Here is Imperial Brands PLC’s sales and net profit for the past few years:

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Growth is probably one of the most important factors in the valuation of a business. GuruFocus research has found that growth is closely tied to the long-term performance of a company’s stocks. If a company’s business is growing, the business typically creates value for its shareholders, especially if the growth is profitable. Likewise, if the income and profits of a business decrease, the value of the business will decrease. Imperial Brands PLC’s 3-year average revenue growth rate is within the average for companies in the tobacco products industry. Imperial Brands PLC’s 3-year average EBITDA growth rate is -2.1%, which ranks among the average for companies in the tobacco products industry.

Another way to look at the profitability of a business is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) The extent to which a business 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 should pay on average to all its security holders to finance its assets. We want to have a return on invested capital greater than the weighted cost of capital. Over the past 12 months, Imperial Brands PLC’s return on invested capital is 11.14 and its cost of capital is 5.25. Imperial Brands PLC’s historical ROIC vs WACC comparison is shown below:

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In conclusion, the stock of Imperial Brands PLC (OTCPK: IMBBY, 30-year Financials) would be considerably overvalued. The company’s financial situation is bad and its profitability is fair. Its growth is in the mid-range of companies in the tobacco products industry. To learn more about Imperial Brands PLC’s shares, you can view its 30-year financial data here.

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