Globalstar Inc (GSAT, Financial) experienced a daily loss of -4.35%, with a 3-month gain of 20% and a Loss Per Share of $0.12. This has left many investors wondering if the stock is modestly undervalued. In this article, we delve into a detailed valuation analysis of Globalstar to answer this question. Read on to gain insights into the intrinsic value of the company.
Introduction to Globalstar Inc
Globalstar Inc is a leading telecommunications company that primarily generates revenue from mobile satellite services. These services are typically utilized where terrestrial wireline and wireless communications networks are either impaired or non-existent. The company offers two-way voice and data transmission services using mobile or fixed devices, and one-way data transmission. With the majority of its revenue generated within the United States, Globalstar is a significant owner of satellite assets.
As of September 19, 2023, Globalstar's stock price stood at $1.32, while its estimated fair value, according to the GF Value, was $1.79. This comparison sets the stage for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a unique valuation method that provides an estimation of a stock's intrinsic value. The GF Value Line, visible on our summary page, represents the fair trading value of the stock. This value is derived from three key factors:
- Historical multiples that the stock has traded at, including PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow.
- A GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Assessing Globalstar's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must thoroughly review a company's financial strength before purchasing shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Globalstar has a cash-to-debt ratio of 0.18, which ranks worse than 61.64% of 391 companies in the Telecommunication Services industry. The overall financial strength of Globalstar is 3 out of 10, which indicates poor financial strength.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Globalstar has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $192.70 million and a Loss Per Share of $0.12. Its operating margin is -10.46%, which ranks worse than 88.34% of 386 companies in the Telecommunication Services industry. Overall, GuruFocus ranks the profitability of Globalstar at 3 out of 10, which indicates poor profitability.
Growth is a significant factor in the valuation of a company. Globalstar's 3-year average revenue growth rate is worse than 62.8% of 379 companies in the Telecommunication Services industry. Globalstar's 3-year average EBITDA growth rate is 3.2%, which ranks worse than 53.13% of 335 companies in the Telecommunication Services industry.
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). If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Globalstar's ROIC is -2.33 while its WACC came in at 8.98.
In conclusion, the stock of Globalstar (GSAT, Financial) appears to be modestly undervalued. The company's financial condition is poor and its profitability is poor. Its growth ranks worse than 53.13% of 335 companies in the Telecommunication Services industry.
To learn more about Globalstar stock, you can check out its 30-Year Financials here.
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