Unveiling Nutanix (NTNX)'s Value: Is It Really Priced Right? A Comprehensive Guide

Exploring the intrinsic value of Nutanix Inc (NTNX) and its market position

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Recently, Nutanix Inc (NTNX, Financial) has seen a daily gain of 2.33% and a substantial 3-month gain of 23.66%. Despite a Loss Per Share of 1.1, the question remains: is the stock modestly overvalued? This article aims to provide a detailed valuation analysis of Nutanix (NTNX) to answer this question. Read on to delve into the financial intricacies of this company.

Company Introduction

Nutanix Inc, a provider of native hybrid cloud capabilities for businesses, majorly derives its revenue from the United States, with a significant presence in Europe, the Middle East, and Asia Pacific. The company's Enterprise Cloud Platform offers web-scale engineering and consumer-grade design, virtualization, and storage into a resilient, software-defined solution. With a stock price of $35.97 and a GF Value of $31.42, Nutanix (NTNX, Financial) appears to be modestly overvalued. The company's market cap stands at $8.50 billion, with sales amounting to $1.90 billion.


Understanding the GF Value

The GF Value is a proprietary measure that reflects the current intrinsic value of a stock. It considers factors such as historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future estimates of business performance. The GF Value Line provides an overview of the stock's fair value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.

With a current price of $35.97 per share, Nutanix has a market cap of $8.50 billion and is estimated to be modestly overvalued. As a result, the long-term return of its stock is likely to be lower than its business growth.


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Financial Strength

Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. Nutanix's cash-to-debt ratio of 1.09 falls below 64.82% of 2737 companies in the Software industry, indicating poor financial strength.


Profitability and Growth

Investing in profitable companies carries less risk, especially those that have demonstrated consistent profitability over the long term. Nutanix, however, has been profitable 0 years over the past 10 years. Its operating margin of -11.1% is worse than 67.99% of 2721 companies in the Software industry, indicating poor profitability.

Growth is a crucial factor in the valuation of a company. Companies that grow faster create more value for shareholders, especially if the growth is profitable. The average annual revenue growth of Nutanix is 5.9%, which is lower than 55.3% of 2394 companies in the Software industry. However, the 3-year average EBITDA growth is 46.9%, which is better than 87.56% of 1993 companies in the Software industry.


Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate 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. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Nutanix's ROIC is -13.56 while its WACC came in at 6.85.



In conclusion, Nutanix (NTNX, Financial) stock appears to be modestly overvalued. The company's financial condition is poor, and its profitability is weak. However, its growth ranks better than 87.56% of 1993 companies in the Software industry. To learn more about Nutanix stock, you can check out its 30-Year Financials here.

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I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.