The stock of CyberOptics (NAS:CYBE, 30-year Financials) is estimated to be modestly 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 $26 per share and the market cap of $189.8 million, CyberOptics stock is believed to be modestly overvalued. GF Value for CyberOptics is shown in the chart below.
Because CyberOptics is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 7.7% over the past five years.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have 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 company. CyberOptics has a cash-to-debt ratio of 4.07, which is better than 68% of the companies in Hardware industry. The overall financial strength of CyberOptics is 9 out of 10, which indicates that the financial strength of CyberOptics is strong. This is the debt and cash of CyberOptics over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. CyberOptics has been profitable 6 years over the past 10 years. During the past 12 months, the company had revenues of $70.1 million and earnings of $0.77 a share. Its operating margin of 8.55% better than 70% of the companies in Hardware industry. Overall, GuruFocus ranks CyberOptics's profitability as fair. This is the revenue and net income of CyberOptics 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 CyberOptics is 7.7%, which ranks better than 70% of the companies in Hardware industry. The 3-year average EBITDA growth rate is 35.4%, which ranks better than 87% of the companies in Hardware industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, CyberOptics's ROIC is 10.41 while its WACC came in at 11.24. The historical ROIC vs WACC comparison of CyberOptics is shown below:
In summary, the stock of CyberOptics (NAS:CYBE, 30-year Financials) is believed to be modestly overvalued. The company's financial condition is strong and its profitability is fair. Its growth ranks better than 87% of the companies in Hardware industry. To learn more about CyberOptics stock, you can check out its 30-year Financials here.
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