Despite a daily loss of -3.86% and a 3-month loss of -18.07%, Zebra Technologies Corp (ZBRA, Financial) boasts an impressive Earnings Per Share (EPS) of 12.51. The question that arises is: is the stock significantly undervalued? This article presents a valuation analysis that aims to answer this question. We invite you to delve deeper into the financial intricacies of Zebra Technologies (ZBRA).
Company Introduction
Zebra Technologies is a leading provider of automatic identification and data capture technology to enterprises. Its solutions include barcode printers and scanners, mobile computers, and workflow optimization software. The firm primarily serves the retail, transportation logistics, manufacturing, and healthcare markets, designing custom solutions to improve efficiency at its customers.
With a current stock price of $206.02 and a market cap of $10.60 billion, Zebra Technologies (ZBRA, Financial) is significantly undervalued based on the GuruFocus Value calculation. The GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance.
Understanding GF Value
The GF Value is a unique measure that gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
As Zebra Technologies 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 low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength.
Zebra Technologies has a cash-to-debt ratio of 0.03, which ranks worse than 97.85% of 2370 companies in the Hardware industry. Based on this, GuruFocus ranks Zebra Technologies's financial strength as 5 out of 10, suggesting 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. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Zebra Technologies has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $5.50 billion and Earnings Per Share (EPS) of $12.51. Its operating margin is 15.07%, which ranks better than 87.41% of 2454 companies in the Hardware industry. Overall, the profitability of Zebra Technologies is ranked 8 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Zebra Technologies is10.2%, which ranks better than 66.65% of 2330 companies in the Hardware industry. The 3-year average EBITDA growth is 11.2%, which ranks better than 51.05% of 1959 companies in the Hardware industry.
ROIC vs. WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Zebra Technologies's return on invested capital is 9.95, and its cost of capital is 13.57.
Conclusion
Overall, Zebra Technologies (ZBRA, Financial) stock is estimated to be significantly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 51.05% of 1959 companies in the Hardware industry. To learn more about Zebra Technologies 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.
