One Stop Systems: An Undervalued Gem in the Hardware Industry?
One Stop Systems Inc (NASDAQ:OSS), a company known for its innovative Artificial Intelligence (AI) Transportable edge computing modules and systems, has recently experienced a significant daily gain of 29.52%. However, over the past three months, the company has suffered a loss of 13.31%. It also reported a Loss Per Share of 0.29. Given these mixed signals, the question arises: Is One Stop Systems' stock significantly undervalued?
In this article, we will delve into the valuation analysis of One Stop Systems, shedding light on its intrinsic value. We invite you to join us as we explore the financial health, profitability, and growth prospects of this company.
About One Stop Systems Inc
One Stop Systems Inc designs and manufactures advanced AI Transportable edge computing modules and systems. These products, including ruggedized servers, compute accelerators, expansion systems, flash storage arrays, and Ion Accelerator SAN, NAS, and data recording software, are primarily used for AI data set capture, training, and large-scale inference. The company's products are popular in the defense, oil and gas, mining, autonomous vehicles, and rugged entertainment applications.
Despite the company's impressive portfolio, its stock price of $2.15 per share seems to be significantly undervalued when compared to its GF Value of $3.95. This discrepancy prompts a deeper analysis of One Stop Systems' value.
Understanding the 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, and future business performance estimates. The GF Value Line gives an overview of the stock's fair trading value.
One Stop Systems' stock appears to be significantly undervalued based on the GF Value calculation. At its current price of $2.15 per share, One Stop Systems has a market cap of $44.20 million, indicating that the stock is significantly undervalued. As a result, the long-term return of its stock is likely to be much higher than its business growth.
Assessing the Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss. A company's cash-to-debt ratio and interest coverage provide insights into its financial strength. One Stop Systems has a cash-to-debt ratio of 4.12, better than 68.75% of companies in the Hardware industry. Its overall financial strength is 7 out of 10, indicating fair financial strength.
Profitability and Growth
Consistent profitability over the long term offers less risk for investors. One Stop Systems has been profitable 3 over the past 10 years. However, its operating margin of -0.55% ranks worse than 68.81% of companies in the Hardware industry, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. One Stop Systems's 3-year average revenue growth rate is worse than 67.86% of companies in the Hardware industry. However, its 3-year average EBITDA growth rate is 31.5%, ranking better than 78.05% of companies in the industry.
ROIC vs. WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is a good way to evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, One Stop Systems's ROIC was -5.61, while its WACC came in at 9.12.
Conclusion
In conclusion, the stock of One Stop Systems appears to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 78.05% of 1950 companies in the Hardware industry. To learn more about One Stop Systems stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
