As of September 26, 2023, Progyny Inc (PGNY, Financial) experienced a daily gain of 2.89%, despite a 3-month loss of 8.01%. With an Earnings Per Share (EPS) of $0.49, the question arises: is Progyny significantly undervalued? This article aims to provide a comprehensive valuation analysis of Progyny, offering valuable insights into its financial performance and market position.
Company Overview
Progyny Inc is a leading player in the healthcare sector, specializing in fertility and family building benefits solutions. Catering to employers across various industries, Progyny's solutions include treatment services (Smart Cycles), access to a network of high-quality fertility specialists, and active management of a selective network of high-quality provider clinics. Despite a market cap of $3.30 billion and sales amounting to $957.50 million, Progyny's stock price stands at $34.21, significantly lower than its GF Value of $79.76. This discrepancy prompts a deeper investigation into Progyny's intrinsic value.
Understanding GF Value
The GF Value is a proprietary measure that determines the intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. 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.
According to GuruFocus' valuation method, Progyny (PGNY, Financial) appears to be significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it is crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Progyny boasts a cash-to-debt ratio of 15.58, ranking better than 82.62% of 656 companies in the Healthcare Providers & Services industry. Its overall financial strength is 8 out of 10, indicating strong financial health.
Profitability and Growth
Investing in profitable companies is less risky, especially those with consistent profitability over the long term. A company with high profit margins is usually a safer investment than those with low profit margins. Progyny has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $957.50 Mil and Earnings Per Share (EPS) of $0.49. Its operating margin is 4.67%, which ranks better than 53.56% of 661 companies in the Healthcare Providers & Services industry. Overall, the profitability of Progyny is ranked 7 out of 10, which indicates fair profitability.
Growth is a crucial factor in the valuation of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. However, the 3-year average annual revenue growth of Progyny is -10.8%, which ranks worse than 89.01% of 573 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is -24%, which ranks worse than 87.16% of 522 companies in the Healthcare Providers & Services industry.
ROIC vs WACC
Another way to assess the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of capital. The 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. For the past 12 months, Progyny's return on invested capital is 21.2, and its cost of capital is 13.97.
Conclusion
In conclusion, Progyny (PGNY, Financial) stock appears to be significantly undervalued. The company's financial condition is strong, and its profitability is fair. However, its growth ranks worse than 87.16% of 522 companies in the Healthcare Providers & Services industry. To learn more about Progyny stock, you can check out its 30-Year Financials here.
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