AeroVironment (AVAV): A Comprehensive Analysis of Its Market Value
AeroVironment Inc (NASDAQ:AVAV) recently experienced a daily gain of 6.55%, with a 13.56% increase over the last three months. However, the company reported a Loss Per Share of 5.77. This raises the question: Is the stock fairly valued? In this analysis, we'll delve deep into AeroVironment's financials and market position to answer this question. Keep reading for a comprehensive valuation analysis of AeroVironment (NASDAQ:AVAV).
Company Introduction
AeroVironment Inc operates within the United States Department of Defense and allied international governments, supplying unmanned aircraft systems, tactical missile systems, high-altitude pseudo-satellites, and other related services. These systems provide "eyes in the sky" without needing an actual person or driver, enhancing security, surveillance, and sensing capabilities.
As of October 13, 2023, the company's stock price stands at $112.58, with a market cap of $3 billion. The GF Value, a proprietary estimation of fair value, is set at $119.68. This suggests that AeroVironment's stock is fairly valued, but a deeper analysis is needed to confirm this.
Understanding GF Value
The GF Value is an exclusive GuruFocus metric that estimates a stock's intrinsic value. It considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
AeroVironment's stock appears to be fairly valued according to the GF Value calculation. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth, given its current price and market cap.
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Financial Strength
Before investing in a company, it's crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. AeroVironment's cash-to-debt ratio of 0.68 ranks worse than 51.54% of 293 companies in the Aerospace & Defense industry. However, its overall financial strength is 7 out of 10, indicating fair financial health.
Profitability and Growth
A company's profitability is a significant factor to consider when investing. AeroVironment has been profitable 8 out of the past 10 years. However, its operating margin of 1.2% ranks worse than 63.61% of 294 companies in the Aerospace & Defense industry, indicating fair profitability.
Another crucial factor in the valuation of a company is its growth. AeroVironment's average annual revenue growth is 12.3%, which ranks better than 76.89% of 264 companies in the Aerospace & Defense industry. However, its 3-year average EBITDA growth is 0%, ranking worse than its industry peers.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also provide insights into its profitability. ROIC measures how well a company generates cash flow relative to the capital invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. AeroVironment's ROIC is 0.88 while its WACC came in at 8.62.
Conclusion
Overall, AeroVironment's stock seems to be fairly valued. The company's financial condition and profitability are fair, but its growth ranks lower than its industry peers. For more details about AeroVironment stock, 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.
This article first appeared on GuruFocus.
