Despite a daily loss of 14.12% and a three-month loss of 23.57%, Trimble Inc (TRMB, Financial) reported an Earnings Per Share (EPS) (EPS) of 1.38. This raises an intriguing question: Is the stock significantly undervalued? This article presents a thorough valuation analysis that will help answer this question. Read on to understand more about Trimble's intrinsic value.
Company Overview
Trimble Inc is a global provider of location-based solutions, leveraging technologies such as global positioning systems (GPS), laser, optical, and inertial technologies. The company's diverse portfolio includes 3D laser scanning, flow and application control systems, monitoring systems, water management, and navigation infrastructure. Trimble serves various industries, including agriculture, architecture, civil engineering, survey and land administration, construction, and geospatial. The company operates in four segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation. Most of its revenues come from the US and Europe, with the rest from the Asia Pacific and other markets.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from historical trading multiples, a GuruFocus adjustment factor based on the company's 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.
At its current price of $40.48 per share, Trimble (TRMB, Financial) appears to be significantly undervalued, with a market cap of $10.10 billion. Given that Trimble is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent loss of capital. Therefore, it is crucial to review the financial strength of a company before deciding whether to buy its stock. Trimble has a cash-to-debt ratio of 0.07, which is worse than 95.82% of 2370 companies in the Hardware industry. GuruFocus ranks the overall financial strength of Trimble at 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Trimble has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $3.70 billion and Earnings Per Share (EPS) of $1.38. Its operating margin is 13.2%, which ranks better than 83.6% of 2451 companies in the Hardware industry. Overall, GuruFocus ranks the profitability of Trimble at 8 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Trimble is 4.4%, which ranks better than 50.34% of 2328 companies in the Hardware industry. The 3-year average EBITDA growth is 9%, which ranks worse than 53.35% of 1957 companies in the Hardware industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted 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 ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Trimble's ROIC was 5.27, while its WACC came in at 13.6.
Conclusion
In conclusion, the stock of Trimble (TRMB, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 53.35% of 1957 companies in the Hardware industry. To learn more about Trimble 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.
