Despite a -2.84% daily loss and a -45.03% three-month loss, SolarEdge Technologies Inc (SEDG, Financial) boasts an impressive Earnings Per Share (EPS) (EPS) of 5.17. The question on the minds of investors is: Is the stock significantly undervalued? This article provides a comprehensive valuation analysis of SolarEdge Technologies (SEDG) to answer this question. Let's delve into the details.
About SolarEdge Technologies
SolarEdge Technologies designs, develops, and sells direct current optimized inverter systems for solar photovoltaic installations. The company's system consists of power optimizers, inverters, and a cloud-based monitoring platform. It addresses a broad range of solar market segments, from residential to commercial and small utility-scale solar installations. The company sells its products directly to solar installers, engineering, procurement, and construction firms, and indirectly to solar installers through distributors and electrical equipment wholesalers. Additionally, the company has nonsolar products targeting energy storage and e-mobility.
Understanding the GF Value
The GF Value is a proprietary measure that presents the current intrinsic value of a stock. It's calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, SolarEdge Technologies (SEDG, Financial) appears to be significantly undervalued. At its current price of $157.09 per share and a market cap of $8.90 billion, SolarEdge Technologies stock gives every indication of being significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength Analysis
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. SolarEdge Technologies has a cash-to-debt ratio of 1.43, ranking worse than 57.43% of 895 companies in the Semiconductors industry. However, GuruFocus ranks SolarEdge Technologies's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. SolarEdge Technologies has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $3.70 billion and EPS of $5.17. Its operating margin is 10.04%, which ranks better than 59.91% of 938 companies in the Semiconductors industry. Overall, GuruFocus ranks the profitability of SolarEdge Technologies at 8 out of 10, indicating strong profitability.
Another crucial factor in the valuation of a company is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of SolarEdge Technologies is 23.5%, which ranks better than 74.62% of 863 companies in the Semiconductors industry. However, the 3-year average EBITDA growth is -0.9%, which ranks worse than 78.75% of 767 companies in the Semiconductors industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, SolarEdge Technologies's ROIC is 9.74, and its cost of capital is 10.96.
Conclusion
In summary, SolarEdge Technologies (SEDG, Financial) appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. However, its growth ranks worse than 78.75% of 767 companies in the Semiconductors industry. To learn more about SolarEdge Technologies stock, you can check out its 30-Year Financials here.
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