10x Genomics Inc (TXG, Financial) experienced a daily loss of 5.62% and a 3-month loss of 12.81%. The company also reported a Loss Per Share of 1.49. Despite these figures, we aim to explore whether the stock is significantly undervalued. In the following analysis, we'll delve deeper into the valuation of 10x Genomics, providing readers with a comprehensive understanding of the stock's potential.
Introduction to 10x Genomics
10x Genomics Inc is a U.S.-based life science technology company. The company's offerings include instruments, consumables, and software for analyzing biological systems. Its product portfolio includes Chromium Controller, Reagent Kits, 10x Compatible Products, and Informatics Software, among others. The majority of the company's revenue is generated from consumables. With a market cap of $5.60 billion and a stock price of $47.36 per share, it's worth comparing these figures to the estimated fair value of the stock, also known as the GF Value.
Understanding the GF Value of 10x Genomics
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
1. Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
2. GuruFocus adjustment factor based on the company's past returns and growth.
3. Future estimates of the business performance.
According to our valuation method, 10x Genomics shows every sign of being significantly undervalued. The stock's fair value is estimated based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns.
Because 10x Genomics is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength of 10x Genomics
Investing in companies with low financial strength could result in permanent capital loss. Therefore, 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. 10x Genomics has a cash-to-debt ratio of 3.93, which ranks better than 71.67% of 653 companies in the Healthcare Providers & Services industry. Based on this, GuruFocus ranks 10x Genomics's financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability and Growth of 10x Genomics
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. 10x Genomics has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $568.40 million and a Loss Per Share of $1.49. Its operating margin is -31.39%, which ranks worse than 79.94% of 648 companies in the Healthcare Providers & Services industry. Overall, the profitability of 10x Genomics is ranked 3 out of 10, indicating poor profitability.
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 10x Genomics is -10.3%, which ranks worse than 88.97% of 571 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is -28.3%, which ranks worse than 89.16% of 526 companies in the Healthcare Providers & Services industry.
Evaluating Profitability: ROIC vs WACC
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, 10x Genomics's ROIC is -37.34 while its WACC came in at 14.1.
Conclusion
In conclusion, the stock of 10x Genomics shows every sign of being significantly undervalued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 89.16% of 526 companies in the Healthcare Providers & Services industry. To learn more about 10x Genomics stock, you can check out its 30-Year Financials here.
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