The stock of Intellicheck (NAS:IDN, 30-year Financials) is believed 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 $9.6 per share and the market cap of $178.5 million, Intellicheck stock gives every indication of being modestly overvalued. GF Value for Intellicheck is shown in the chart below.
Because Intellicheck is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 27.4% over the past five years.
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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. Intellicheck has a cash-to-debt ratio of 397.61, which is better than 83% of the companies in Software industry. The overall financial strength of Intellicheck is 8 out of 10, which indicates that the financial strength of Intellicheck is strong. This is the debt and cash of Intellicheck over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Intellicheck has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $10.7 million and earnings of $0.023 a share. Its operating margin is -2.41%, which ranks in the middle range of the companies in Software industry. Overall, GuruFocus ranks the profitability of Intellicheck at 2 out of 10, which indicates poor profitability. This is the revenue and net income of Intellicheck 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 Intellicheck is 27.4%, which ranks better than 86% of the companies in Software industry. The 3-year average EBITDA growth rate is 77.4%, which ranks better than 96% of the companies in Software 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, Intellicheck's ROIC is -2.67 while its WACC came in at 13.34. The historical ROIC vs WACC comparison of Intellicheck is shown below:
In summary, The stock of Intellicheck (NAS:IDN, 30-year Financials) is believed to be modestly overvalued. The company's financial condition is strong and its profitability is poor. Its growth ranks better than 96% of the companies in Software industry. To learn more about Intellicheck stock, you can check out its 30-year Financials here.
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