eXp World Holdings (EXPI): A Hidden Gem in the Real Estate Market?
On October 3, 2023, eXp World Holdings Inc (NASDAQ:EXPI) experienced a day's loss of -8.34%, contributing to a 3-month loss of -28.71%. Despite these figures and an Earnings Per Share (EPS) of 0.05, the question arises: is the stock significantly undervalued? In this article, we aim to answer this question by conducting a comprehensive valuation analysis of eXp World Holdings (NASDAQ:EXPI). We invite you to delve into this analysis and gain valuable insights into the company's fair value.
Company Overview
eXp World Holdings Inc is a leading cloud-based residential real estate company. It operates a real estate brokerage and a technology platform that uses immersive technologies to help businesses increase their effectiveness and reduce costs from operating in traditional brick and mortar office spaces. The company's business categories include Real Estate Brokerage, Technology Products and Services, Title, Escrow, Settlement Services, and Mortgage Brokerage Services. It has a significant presence in the United States and Canada, with operations extending to the United Kingdom, Australia, South Africa, France, India, Portugal, Mexico, among others. With a market cap of $2.20 billion and a stock price of $14.39 per share, the company's valuation appears significantly undervalued when compared to its GF Value of $32.97.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on GuruFocus' valuation method, eXp World Holdings' stock appears to be significantly undervalued. The stock's current price of $14.39 per share is significantly below the GF Value Line, indicating high potential for future returns. As a result, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Before investing in a company, it's crucial to assess its financial strength. Investing in companies with poor financial strength can lead to a higher risk of permanent loss. A great way to understand a company's financial strength is by looking at its cash-to-debt ratio and interest coverage. eXp World Holdings has a cash-to-debt ratio of 3897.31, ranking better than 91.56% of 1777 companies in the Real Estate industry. The overall financial strength of eXp World Holdings is 8 out of 10, indicating strong financial health.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Higher profit margins usually indicate a better investment compared to a company with lower profit margins. eXp World Holdings has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $4.30 billion and an Earnings Per Share (EPS) of $0.05. Its operating margin is -0.03%, ranking worse than 75.06% of 1776 companies in the Real Estate industry. Overall, the profitability of eXp World Holdings is ranked 4 out of 10, indicating poor profitability.
One of the most important factors in the valuation of a company is its growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of eXp World Holdings is 55.9%, ranking better than 94.08% of 1671 companies in the Real Estate industry. The 3-year average EBITDA growth is 0%, ranking worse than 0% of 1374 companies in the Real Estate industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, eXp World Holdings's ROIC was -5.36, while its WACC came in at 18.73.
Conclusion
In summary, the stock of eXp World Holdings appears to be significantly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks worse than 0% of 1374 companies in the Real Estate industry. To learn more about eXp World Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
