Unveiling Five9 (FIVN)'s Value: Is It Really Priced Right? A Comprehensive Guide
Five9 Inc (NASDAQ:FIVN), a leading provider of cloud-native contact center software, experienced a 3.96% gain, despite a 3-month loss of 13.1%. With a Loss Per Share of 1.2, the question arises: Is the stock significantly undervalued? This article aims to provide a comprehensive valuation analysis of Five9 (NASDAQ:FIVN) to answer this question. Read on to discover more about this intriguing stock.
Company Introduction
Five9 offers an array of digital customer service, sales, and marketing engagement solutions. Its Virtual Contact Center platform combines core telephony functionality, omnichannel engagement, and various modules into a unified cloud contact-center-as-a-service (CCaaS) platform. The company's modules include digital self-service, agent assist technology, workflow automation, and workforce optimization solutions. With a current stock price of $66.62 and a GF Value of $167.35, Five9 appears to be significantly undervalued.
Understanding GF Value
The GF Value is an exclusive method that calculates the intrinsic value of a stock. It considers historical multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. 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.
Five9 (NASDAQ:FIVN) stock is estimated to be significantly undervalued based on the GuruFocus Value calculation. With a market cap of $4.80 billion at its current price of $66.62 per share, the long-term return of its stock is likely to be much higher than its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, a company's financial strength must be carefully reviewed before deciding to buy shares. Five9 has a cash-to-debt ratio of 0.83, ranking worse than 68.43% of 2753 companies in the Software industry. Based on this, GuruFocus ranks Five9's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Five9 has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $848 million and a Loss Per Share of $1.2. Its operating margin is -10.52%, ranking worse than 67.65% of 2751 companies in the Software industry. Overall, GuruFocus ranks the profitability of Five9 at 4 out of 10, indicating poor profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Five9 is 27%, ranking better than 82.67% of 2412 companies in the Software industry. The 3-year average EBITDA growth is 0%, ranking worse than 0% of 2009 companies in the Software 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, Five9's ROIC was -14.94, while its WACC came in at 8.5.
Conclusion
In summary, the stock of Five9 (NASDAQ:FIVN) is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks worse than 0% of 2009 companies in the Software industry. To learn more about Five9 stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article first appeared on GuruFocus.
