Is CyberArk Software (CYBR) Priced Right? A Comprehensive Analysis of Its Market Value
On September 20, 2023, CyberArk Software Ltd (NASDAQ:CYBR) experienced a daily gain of 3.8%, contributing to a 10.12% increase over the past three months. However, the company reported a Loss Per Share of 2.81. This raises an important question: Is CyberArk Software (NASDAQ:CYBR) fairly valued? Let's delve into a comprehensive valuation analysis to find the answer.
About CyberArk Software
CyberArk Software Ltd is a leading provider of IT security solutions, protecting data, infrastructure, and assets across enterprises. The company's software solutions focus on safeguarding privileged accounts, credentials, and secrets. Its product portfolio includes the Enterprise Password Vault, Privileged Session Manager, Privileged Threat Analytics, and CyberArk Privilege Cloud. The company generates maximum revenue from the United States, with a significant presence in the United Kingdom, Europe, the Middle East, Africa, and other countries.
With a stock price of $172.94 and a market cap of $7.20 billion, an analysis of CyberArk Software's GF Value is crucial to understand its intrinsic value and fair trading price.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides a snapshot of the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it indicates overvaluation and a likely poor future return. Conversely, if it is significantly below the GF Value Line, its future return is likely to be higher.
The stock of CyberArk Software is estimated to be fairly valued according to GuruFocus Value calculation. Given that CyberArk Software is fairly valued, the long-term return of its stock is likely to align with the rate of its business growth.
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Assessing 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. The cash-to-debt ratio and interest coverage offer valuable insights into a company's financial strength. CyberArk Software has a cash-to-debt ratio of 1.59, which is lower than 58.37% of 2755 companies in the Software industry. The overall financial strength of CyberArk Software is 6 out of 10, which indicates fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. CyberArk Software has been profitable 7 out of the past 10 years. Over the past twelve months, the company had a revenue of $659.40 million and a Loss Per Share of $2.81. Its operating margin is -23.56%, which ranks worse than 74.75% of 2752 companies in the Software industry. Overall, the profitability of CyberArk Software is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of CyberArk Software is 9.3%, which ranks better than 53.34% of 2413 companies in the Software industry. The 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 2010 companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) helps determine its profitability. ROIC measures how well a company generates cash flow relative to the capital it has 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. When ROIC is higher than WACC, it implies the company is creating value for shareholders. For the past 12 months, CyberArk Software's ROIC is -13.34, and its WACC is 8.06.
Conclusion
In summary, the stock of CyberArk Software (NASDAQ:CYBR) is estimated to be fairly valued. The company's financial condition is fair, and its profitability is fair. Its growth ranks worse than 0% of 2010 companies in the Software industry. To learn more about CyberArk Software stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
