Is SilverSun Technologies Stock Fairly Valued?
SilverSun Technologies Inc (NASDAQ:SSNT) recently recorded a daily gain of 7.55%, and a 3-month gain of 20.54%, with an Earnings Per Share (EPS) (EPS) of $0.09. This article aims to answer the question: is SilverSun Technologies' stock fairly valued? Keep reading for an in-depth valuation analysis.
Introduction to SilverSun Technologies
SilverSun Technologies Inc is a business application, technology, and consulting company. The firm offers strategies and solutions to meet information, technology, and business management needs, enabling customers to manage, protect, and monetize their enterprise assets in the cloud. SilverSun Technologies provides solutions for accounting and business management, financial reporting, enterprise resource planning (ERP), warehouse management systems (WMS), customer relationship management (CRM), and business intelligence (BI).
The company's stock price currently stands at $3.99, while the GF Value, an estimate of its fair value, is $3.82. This comparison sets the stage for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor derived from the company's past performance and growth, and future business performance estimates. The GF Value Line gives an overview of the fair value that the stock should 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.
At its current price of $3.99 per share, SilverSun Technologies (NASDAQ:SSNT), with a market cap of $21 million, is believed to be fairly valued. As such, 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 SilverSun Technologies
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are great ways to understand its financial strength. SilverSun Technologies has a cash-to-debt ratio of 3.56, which ranks better than 53.62% of 2706 companies in the Software industry. The overall financial strength of SilverSun Technologies is 8 out of 10, indicating strong financial health.
Profitability and Growth of SilverSun Technologies
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. SilverSun Technologies has been profitable 7 times over the past 10 years. Over the past twelve months, the company had a revenue of $49.70 million and an EPS of $0.09. Its operating margin is 1.08%, which ranks worse than 54.02% of 2725 companies in the Software industry. Overall, GuruFocus ranks the profitability of SilverSun Technologies at 6 out of 10, indicating fair profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of SilverSun Technologies is 0.6%, which ranks worse than 68.85% of 2392 companies in the Software industry. The 3-year average EBITDA growth is 0%, which ranks worse than 0% of 1994 companies in the Software industry.
ROIC vs WACC
A company's profitability can also be evaluated by comparing its return on invested capital (ROIC) to its 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. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, SilverSun Technologies's ROIC was 4.47 while its WACC came in at 11.67.
Conclusion
In conclusion, the stock of SilverSun Technologies is believed to be fairly valued. The company's financial condition is strong, and its profitability is fair. Its growth ranks worse than 0% of 1994 companies in the Software industry. To learn more about SilverSun Technologies stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
