The stock of ShiftPixy (NAS:PIXY, 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 $3.34 per share and the market cap of $69.9 million, ShiftPixy stock appears to be significantly overvalued. GF Value for ShiftPixy is shown in the chart below.
Because ShiftPixy is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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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. ShiftPixy has a cash-to-debt ratio of 10000.00, which ranks better than 100% of the companies in Business Services industry. Based on this, GuruFocus ranks ShiftPixy's financial strength as 4 out of 10, suggesting poor balance sheet. This is the debt and cash of ShiftPixy 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. ShiftPixy has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $8.8 million and loss of $3.736 a share. Its operating margin is -242.13%, which ranks in the bottom 10% of the companies in Business Services industry. Overall, the profitability of ShiftPixy is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of ShiftPixy over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of ShiftPixy is -75%, which ranks in the bottom 10% of the companies in Business Services industry. The 3-year average EBITDA growth is 24.3%, which ranks better than 81% of the companies in Business Services 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, ShiftPixy's ROIC is -172.38 while its WACC came in at 12.81. The historical ROIC vs WACC comparison of ShiftPixy is shown below:
In short, the stock of ShiftPixy (NAS:PIXY, 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 81% of the companies in Business Services industry. To learn more about ShiftPixy stock, you can check out its 30-year Financials here.
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