The stock of VEON (NAS:VEON, 30-year Financials) shows every sign of being modestly undervalued, 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 $1.87 per share and the market cap of $3.3 billion, VEON stock is estimated to be modestly undervalued. GF Value for VEON is shown in the chart below.
Because VEON is relatively undervalued, the long-term return of its stock is likely to be higher than its 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. VEON has a cash-to-debt ratio of 0.14, which ranks worse than 73% of the companies in Telecommunication Services industry. Based on this, GuruFocus ranks VEON’s financial strength as 3 out of 10, suggesting poor balance sheet. This is the debt and cash of VEON 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. VEON has been profitable 5 over the past 10 years. Over the past twelve months, the company had a revenue of $7.9 billion and loss of $0.19 a share. Its operating margin is 19.93%, which ranks better than 80% of the companies in Telecommunication Services industry. Overall, the profitability of VEON is ranked 5 out of 10, which indicates fair profitability. This is the revenue and net income of VEON over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. VEON’s 3-year average revenue growth rate is worse than 78% of the companies in Telecommunication Services industry. VEON’s 3-year average EBITDA growth rate is -0.3%, which ranks worse than 68% of the companies in Telecommunication Services 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, VEON’s ROIC was -47.17, while its WACC came in at -26.31. The historical ROIC vs WACC comparison of VEON is shown below:
To conclude, VEON (NAS:VEON, 30-year Financials) stock shows every sign of being modestly undervalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 68% of the companies in Telecommunication Services industry. To learn more about VEON stock, you can check out its 30-year Financials here.
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