iRhythm Technologies Inc (IRTC, Financial) has seen a daily gain of 7.4%, but has experienced a 3-month loss of -5.76%. With an Earnings Per Share (EPS) loss of 3.28, the question arises: is the stock significantly undervalued? Our valuation analysis aims to answer this question and provide a comprehensive understanding of iRhythm Technologies' intrinsic value. Keep reading to discover more.
About iRhythm Technologies
iRhythm Technologies Inc is a commercial-stage digital healthcare company revolutionizing the clinical diagnosis of cardiac arrhythmias. It combines wearable biosensing technology with cloud-based data analytics and machine-learning capabilities. The company's Zio service is an innovative platform that includes an easy-to-wear biosensor that can be worn for up to 14 consecutive days. It uses powerful proprietary algorithms to convert data from millions of heartbeats into clinically actionable information. iRhythm Technologies derives its revenue mainly from the United States.
Currently, the company's stock price stands at $91.25, with a market cap of $2.80 billion. When compared to the GF Value of $150.03, the stock appears to be significantly undervalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should be traded at. 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.
iRhythm Technologies (IRTC, Financial) stock gives every indication of being significantly undervalued based on the GuruFocus Value calculation. At its current price of $91.25 per share, iRhythm Technologies has a market cap of $2.80 billion and the stock appears to be significantly undervalued. As such, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. iRhythm Technologies has a cash-to-debt ratio of 1.27, which ranks worse than 60.83% of 840 companies in the Medical Devices & Instruments industry. The overall financial strength of iRhythm Technologies is 7 out of 10, which indicates that the financial strength of iRhythm Technologies is fair.
Profitability and Growth
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. iRhythm Technologies has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $452.10 million and Loss Per Share of $3.28. Its operating margin is -22.16%, which ranks worse than 62.99% of 835 companies in the Medical Devices & Instruments industry. Overall, the profitability of iRhythm Technologies is ranked 3 out of 10, which indicates 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 iRhythm Technologies is 17.4%, which ranks better than 72.23% of 731 companies in the Medical Devices & Instruments industry. The 3-year average EBITDA growth rate is -16.3%, which ranks worse than 81.55% of 737 companies in the Medical Devices & Instruments 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). 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, iRhythm Technologies's ROIC is -54.7 while its WACC came in at 9.33.
Conclusion
Overall, iRhythm Technologies (IRTC, Financial) stock gives every indication of being significantly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks worse than 81.55% of 737 companies in the Medical Devices & Instruments industry. To learn more about iRhythm Technologies stock, you can check out its 30-Year Financials here.
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