Equinix Inc (EQIX, Financial) saw a daily gain of 5.46%, despite a 3-month loss of 11.07%. With an Earnings Per Share (EPS) of 9.3, the question arises: is the stock fairly valued? This article sets out to answer that question by examining the company's intrinsic value, also known as GF Value. Let's delve into the details.
About Equinix Inc (EQIX, Financial)
Equinix operates 248 data centers in 71 markets worldwide, generating 46% of total revenue in the Americas, 32% in Europe, the Middle East, and Africa, and 22% in Asia-Pacific. With over 10,000 customers dispersed over five verticals, Equinix's revenue primarily comes from renting space to tenants and related services. The company operates as a real estate investment trust.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
Equinix (EQIX, Financial) is believed to be fairly valued, according to GuruFocus Value calculation. The current price of $719.51 per share and the market cap of $67.30 billion suggest that Equinix stock is trading at its fair value. Therefore, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Equinix has a cash-to-debt ratio of 0.14, which ranks better than 70.1% of 729 companies in the REITs industry. Based on this, GuruFocus ranks Equinix's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Equinix has been profitable 9 over the past 10 years. Its operating margin is 17.51%, which ranks worse than 83.91% of 690 companies in the REITs industry. Overall, the profitability of Equinix is ranked 8 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Equinix is 6.4%, which ranks better than 73.97% of 634 companies in the REITs industry. The 3-year average EBITDA growth is 3.1%, which ranks better than 55.49% of 537 companies in the REITs industry.
ROIC vs 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 ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Equinix's ROIC was 4.08, while its WACC came in at 8.57.
Conclusion
In conclusion, the stock of Equinix is believed to be fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 55.49% of 537 companies in the REITs industry. To learn more about Equinix stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
