Tandem Diabetes Care Inc (TNDM, Financial) recently reported a daily gain of 3.11% and an impressive three-month gain of 118.94%. Despite these gains, the company has a reported Loss Per Share of 2.17. This raises a critical question: Is Tandem Diabetes Care fairly valued at its current market price? This article delves into Tandem Diabetes Care's valuation to provide investors with a clear perspective.
Company Overview
Tandem Diabetes Care designs, manufactures, and markets advanced insulin pumps for individuals with diabetes. Since its market entry in 2012, Tandem Diabetes Care has launched several generations of its t:slim X2 insulin pump, and more recently, the compact Mobi pump. The company is also developing a tubeless pump. With a substantial portion of its revenue generated in the United States, Tandem Diabetes Care's product portfolio primarily includes insulin pumps and disposable infusion sets. The company's current market cap stands at $3.10 billion with sales amounting to $770 million.
Understanding the GF Value
The GF Value is a proprietary measure used to ascertain the intrinsic value of a stock. It considers historical trading multiples such as PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow, alongside a GuruFocus adjustment factor based on past returns and growth, and projected future business performance. This value serves as a benchmark for determining whether a stock is overvalued, undervalued, or fairly priced.
According to the GF Value, the fair price for Tandem Diabetes Care's stock should hover around the GF Value line. If a stock trades significantly above this line, it may be considered overvalued, suggesting a potentially lower future return. Conversely, trading below this line might indicate undervaluation, pointing to a potentially higher future return. Presently, Tandem Diabetes Care's stock price of $48.7 suggests that it is fairly valued, with a GF Value estimated at $45.4.
Financial Strength and Profitability
Investors must consider a company's financial strength before investing, as weak financial health could lead to permanent capital loss. Tandem Diabetes Care has a cash-to-debt ratio of 0.98, placing it lower than 62.15% of its industry peers. This positions the company's financial strength at a moderate level, with a GuruFocus ranking of 5 out of 10.
Regarding profitability, Tandem Diabetes Care has faced challenges, with an operating margin of -19.1%, ranking below many competitors. The company's growth metrics also reflect some concerns, with a 3-year average EBITDA growth rate significantly lower than industry standards.
Investment Considerations
Given the current assessment, Tandem Diabetes Care's stock appears to be trading close to its intrinsic value, suggesting that the investment might offer returns that align closely with the company's business growth. However, potential investors should consider the company's moderate financial strength and below-average profitability as part of their overall investment decision.
To explore more about Tandem Diabetes Care's financial health and stock performance, visit Tandem Diabetes Care's 30-Year Financials. For insights into high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
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.
