The stock of Naspers is estimated at
Naspers’ stock (OTCPK: NPSNY, 30-year Financials) is estimated to be significantly undervalued, according to the GuruFocus value 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 $ 38.63 per share and market cap of $ 78.1 billion, Naspers stock appears to be significantly undervalued. The GF value for Naspers is shown in the table below.
Given that Naspers is significantly undervalued, its long-term stock return is likely to be much higher than its business growth, which has averaged 36.5% over the past five years.
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Since investing in companies with poor financial strength could result in a permanent loss of capital, investors should carefully consider the financial strength of a company before deciding whether or not to buy shares. Examining the cash-to-debt ratio and interest coverage can provide a good initial perspective on the financial strength of the business. Naspers has a cash-to-debt ratio of 0.74, which is worse than 85% of companies in the interactive media industry. Based on this, GuruFocus ranks Naspers’ financial strength at 4 out of 10, which suggests a poor track record. Here is Naspers’ debt and cash flow over the past few years:
Companies that have historically been profitable over the long term pose less risk to investors who want to buy stocks. Higher profit margins usually dictate a better investment compared to a business with lower profit margins. Naspers has been profitable 10 in the past 10 years. In the past twelve months, the company reported sales of $ 5.9 billion and earnings of $ 2,408 per share. Its operating margin is -17.88%, which is worse than 75% of companies in the interactive media industry. Overall, Naspers’ profitability is ranked 5 out of 10, indicating acceptable profitability. Here is Naspers’ sales and net income for the past few years:
Growth is probably the most important factor in the valuation of a business. GuruFocus research has shown that growth is closely tied to the long-term performance of a company’s stocks. The faster a company grows, the more likely it is to create shareholder value, especially if the growth is profitable. Naspers’ three-year average annual revenue growth rate is 36.5%, which ranks better than 83% of companies in the interactive media industry. The 3-year average EBITDA growth rate is -4.9%, which is worse than 75% of companies in the interactive media 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) measures how well 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 of 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, Naspers’ ROI is -2.77 and its cost of capital is 12.82. Naspers’ historical ROIC vs WACC comparison is shown below:
Overall, the stock of Naspers (OTCPK: NPSNY, 30-year Financials) is considered significantly undervalued. The company’s financial situation is bad and its profitability is fair. Its growth ranks worse than 75% of companies in the interactive media industry. To learn more about the Naspers share, you can view its 30-year financial data here.
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