- By GF Value
The stock of HealthLynked (OTCPK:HLYK, 30-year Financials) shows every sign of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $0.68905 per share and the market cap of $157.2 million, HealthLynked stock shows every sign of being significantly overvalued. GF Value for HealthLynked is shown in the chart below.
Because HealthLynked is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 12.7% over the past five years.
Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. HealthLynked has a cash-to-debt ratio of 2.27, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. Based on this, GuruFocus ranks HealthLynked's financial strength as 6 out of 10, suggesting fair balance sheet. This is the debt and cash of HealthLynked over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. HealthLynked has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $6.6 million and loss of $0.07 a share. Its operating margin is -62.47%, which ranks worse than 85% of the companies in the industry of Healthcare Providers & Services. Overall, GuruFocus ranks the profitability of HealthLynked at 1 out of 10, which indicates poor profitability. This is the revenue and net income of HealthLynked over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. HealthLynked's 3-year average revenue growth rate is better than 71% of the companies in the industry of Healthcare Providers & Services. HealthLynked's 3-year average EBITDA growth rate is -2.1%, which ranks worse than 72% of the companies in the industry of Healthcare Providers & Services.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, HealthLynked's return on invested capital is -54.39, and its cost of capital is 9.82.
In summary, the stock of HealthLynked (OTCPK:HLYK, 30-year Financials) is estimated to be significantly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks worse than 72% of the companies in the industry of Healthcare Providers & Services. To learn more about HealthLynked stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.