Unveiling the Investment Potential of Formula Systems (1985) Ltd (FORTY): A Comprehensive ...
Formula Systems (1985) Ltd (NASDAQ:FORTY) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at 74.99, Formula Systems (1985) Ltd has witnessed a surge of 2.17% over a period, marked against a three-month change of 10.22%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Formula Systems (1985) Ltd is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Formula Systems (1985) Ltd has been assigned the following ranks:
1. Financial strength rank: 6/10
2. Profitability rank: 9/10
3. Growth rank: 10/10
4. GF Value rank: 9/10
5. Momentum rank: 5/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in profitability and growth, and a decent momentum rank, GuruFocus assigned Formula Systems (1985) Ltd the GF Score of 94 out of 100, which signals the highest outperformance potential.
Understanding Formula Systems (1985) Ltd Business
Formula Systems (1985) Ltd is a holding company that, through its subsidiaries, provides information technology services. The company organizes itself into three primary segments based on the subsidiary. The Matrix segment, which generates the majority of revenue, provides software development and existing software expansion services. The Sapiens segment provides software development services for the insurance industry. The Magic Software segment provides vendor management systems and workforce management services, which include accounting and finance, human resources, IT technology, and marketing and sales. Michpal; ZAP Group and Others. The majority of the company's revenue comes from Israel.
Financial Strength Breakdown
According to the Financial Strength rating, Formula Systems (1985) Ltd's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure.
The Interest Coverage ratio for Formula Systems (1985) Ltd stands impressively at 10.49, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With a favorable Debt-to-Revenue ratio of 0.28, Formula Systems (1985) Ltd's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Formula Systems (1985) Ltd's impressive standing among its peers in generating profit.
Formula Systems (1985) Ltd Operating Margin has increased (23.04%) over the past five years, as shown by the following data: 2018: 7.34; 2019: 8.14; 2020: 8.82; 2021: 8.65; 2022: 9.03; .
Furthermore, Formula Systems (1985) Ltd's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 22.33; 2019: 22.69; 2020: 23.14; 2021: 23.45; 2022: 24.20; . This trend underscores the company's growing proficiency in transforming revenue into profit.
Formula Systems (1985) Ltd's strong Predictability Rank of 3.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Formula Systems (1985) Ltd demonstrates a strong commitment to expanding its business.
The company's 3-Year Revenue Growth Rate is 14.4%, which outperforms better than 64.16% of 2394 companies in the Software industry
Moreover, Formula Systems (1985) Ltd has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 20.1, and the rate over the past five years is 27.6. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given the company's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights Formula Systems (1985) Ltd's unparalleled position for potential outperformance. This analysis underscores the company's robust financial health, consistent profitability, and impressive growth trajectory, making it a compelling investment opportunity.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
