IES Holdings (IESC): A Comprehensive Analysis of Its Market Value
IES Holdings Inc (NASDAQ:IESC) recently recorded a daily gain of 5.36%, and a 3-month gain of 21.62%. Its Earnings Per Share (EPS) stands at 3.59. But the question is, is the stock fairly valued? This article provides a detailed valuation analysis, aimed at answering this pertinent question. We invite you to read on for an in-depth understanding of IES Holdings' intrinsic value.
A Snapshot of IES Holdings
IES Holdings Inc (NASDAQ:IESC) owns and manages subsidiaries that design and install integrated electrical and technology systems, and provide infrastructure products and services. The company operates through four business segments. The Communications segment provides technology infrastructure services to large corporations and independent businesses nationwide. The Residential segment offers electrical installation services for single-family housing and multi-family apartment complexes regionally. The Commercial and Industrial segment delivers electrical design, construction, and maintenance services to commercial and industrial markets in various regional markets and nationwide. The Infrastructure Solutions segment provides electrical and mechanical solutions to domestic and international customers. IES Holdings' stock price currently stands at $69.25, with a fair value (GF Value) of $65.9. This comparison sets the stage for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on three factors: historical 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 stock's fair trading value. If the stock price is significantly above the GF Value Line, it is considered overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, the stock may be undervalued, indicating higher future returns.
Based on GuruFocus' valuation method, IES Holdings (NASDAQ:IESC), with its current price of $69.25 per share and a market cap of $1.40 billion, is estimated to be fairly valued. This implies that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of IES Holdings
Before investing in a company's stock, it's crucial to check its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are excellent indicators of a company's financial strength. IES Holdings has a cash-to-debt ratio of 0.79, which is better than 54.59% of 1601 companies in the Construction industry. The overall financial strength of IES Holdings is 8 out of 10, indicating strong financial health.
Profitability and Growth of IES Holdings
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. IES Holdings has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $2.30 billion and Earnings Per Share (EPS) of $3.59. Its operating margin is 5.02%, which ranks better than 51.51% of 1625 companies in the Construction industry. Overall, the profitability of IES Holdings is ranked 8 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of IES Holdings is 27.1%, which ranks better than 90.65% of 1551 companies in the Construction industry. The 3-year average EBITDA growth is 17.4%, which ranks better than 72.23% of 1318 companies in the Construction industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC). 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. Ideally, the ROIC should be higher than the WACC. For the past 12 months, IES Holdings' ROIC is 14.28, and its WACC is 11.04.
Conclusion
In conclusion, the stock of IES Holdings is estimated to be fairly valued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 72.23% of 1318 companies in the Construction industry. To learn more about IES Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
