The stock of Inpixon (NAS:INPX, 30-year Financials) is believed to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $1.18 per share and the market cap of $119.6 million, Inpixon stock gives every indication of being significantly overvalued. GF Value for Inpixon is shown in the chart below.
Because Inpixon is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
Link: These companies may deliever higher future returns at reduced risk.
Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Inpixon has a cash-to-debt ratio of 3.46, which ranks in the middle range of the companies in Software industry. Based on this, GuruFocus ranks Inpixon's financial strength as 4 out of 10, suggesting poor balance sheet. This is the debt and cash of Inpixon over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Inpixon has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $9.3 million and loss of $1.876 a share. Its operating margin is -270.07%, which ranks in the bottom 10% of the companies in Software industry. Overall, the profitability of Inpixon is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Inpixon over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Inpixon is -95.7%, which ranks in the bottom 10% of the companies in Software industry. The 3-year average EBITDA growth rate is 95.6%, which ranks better than 97% of the companies in Software industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company 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 is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Inpixon's ROIC was -91.94, while its WACC came in at 10.82. The historical ROIC vs WACC comparison of Inpixon is shown below:
In conclusion, The stock of Inpixon (NAS:INPX, 30-year Financials) gives every indication of being significantly overvalued. The company's financial condition is poor and its profitability is poor. Its growth ranks better than 97% of the companies in Software industry. To learn more about Inpixon stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
