Keysight Technologies Inc (KEYS, Financial) recently experienced a significant daily loss of 9.05%, contrasting with a modest three-month gain of 0.86%. With an Earnings Per Share (EPS) of 5.45, investors are prompted to question: Is the stock modestly undervalued? This article delves into the valuation of Keysight Technologies, guiding investors through a detailed analysis to determine the stock's true market value.
Company Overview
Keysight Technologies is a pivotal player in the testing and measurement industry, catering primarily to electronics OEMs and suppliers. This role is crucial in ensuring products meet industry standards and specifications. Keysight Technologies specializes in the communications sector, while also serving government, automotive, industrial, and semiconductor manufacturing markets with testing tools, analytical software, and services. The company boasts over 30,000 customers globally, aiming to enhance market efficiency and reduce time to market for its clients.
Understanding the GF Value
The GF Value of Keysight Technologies (KEYS, Financial) is a proprietary measure indicating the stock's intrinsic value at $167.24, suggesting that it is modestly undervalued compared to its current trading price of $145.3. This valuation is meticulously calculated considering historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and anticipated future business performance. The GF Value serves as a benchmark, suggesting that the stock's price will likely gravitate around this value. Stocks trading significantly below this value are posited to offer higher future returns.
Financial Strength and Stability
Investing in companies with robust financial health mitigates the risk of capital loss. Keysight Technologies' financial strength is formidable, with a cash-to-debt ratio of 0.85, although this is lower than 60.61% of its industry peers. The company's overall financial strength has been rated 8 out of 10 by GuruFocus, indicating a strong ability to manage debt and fund operations.
Profitability and Growth Prospects
Keysight Technologies has demonstrated consistent profitability, with an impressive operating margin of 23.53%, ranking higher than 95.82% of its competitors in the hardware industry. The company's growth metrics are also robust, with a 3-year average revenue growth rate outperforming 72.42% of its industry peers. Such strong profitability and growth indicators typically bode well for long-term investment returns.
Comparative Analysis: ROIC and WACC
A critical measure of profitability is the comparison between Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). Keysight Technologies boasts an ROIC of 16.5, surpassing its WACC of 11.03, indicating efficient capital management that enhances shareholder value.
Conclusion
In conclusion, Keysight Technologies (KEYS, Financial) appears modestly undervalued based on its GF Value, indicating potential for higher future returns. The company's strong financial health, coupled with its high profitability and growth rates, makes it an attractive option for investors seeking quality investments in the hardware sector. For a deeper insight into Keysight Technologies' financials and performance metrics, interested investors can view the detailed 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.
