Unveiling iRhythm Technologies (IRTC)'s Value: Is It Really Priced Right? A Comprehensive Guide
The stock of iRhythm Technologies Inc (NASDAQ:IRTC) has experienced a daily loss of -1.95% and a 3-month loss of -13.05%. With a Loss Per Share of 3.28, the question arises: is the stock significantly undervalued? This article provides a comprehensive analysis of the company's valuation, inviting readers to delve into the financial intricacies of iRhythm Technologies (NASDAQ:IRTC).
Company Introduction
iRhythm Technologies Inc is a digital healthcare company at the commercial stage, redefining the clinical diagnosis of cardiac arrhythmias. By combining wearable biosensing technology with cloud-based data analytics and machine-learning capabilities, the company has revolutionized the healthcare sector. The company's Zio service, an ambulatory cardiac monitoring platform, combines an easy-to-wear biosensor with powerful proprietary algorithms. This innovative approach distills data from millions of heartbeats into clinically actionable information. The majority of the company's revenue is derived from the United States.
At a current stock price of $85.6 per share, iRhythm Technologies (NASDAQ:IRTC) has a market cap of $2.60 billion. When compared to its GF Value of $149.77, it appears that the stock is significantly undervalued. An in-depth analysis of the company's financial performance and intrinsic value is provided below.
GF Value Analysis
The GF Value is a unique measure that represents the intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance 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.
iRhythm Technologies (NASDAQ:IRTC) stock is believed to be significantly undervalued according to the GuruFocus Value calculation, which estimates the fair value at which the stock should be traded. If the price of a stock 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. Given that iRhythm Technologies is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Therefore, it is crucial to carefully review the financial strength of a company before deciding to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding a company's financial strength. iRhythm Technologies has a cash-to-debt ratio of 1.27, which is worse than 60.76% of 841 companies in the Medical Devices & Instruments industry. GuruFocus ranks the overall financial strength of iRhythm Technologies at 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. A company with high profit margins is usually a safer investment than those with low profit margins. iRhythm Technologies has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $452.10 million and a Loss Per Share of $3.28. Its operating margin is -22.16%, which ranks worse than 63.04% of 836 companies in the Medical Devices & Instruments industry. Overall, the profitability of iRhythm Technologies is ranked 3 out of 10, indicating poor profitability.
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. iRhythm Technologies's 3-year average revenue growth rate is better than 72.23% of 731 companies in the Medical Devices & Instruments industry. However, its 3-year average EBITDA growth rate is -16.3%, ranking worse than 81.57% of 738 companies in the same 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, iRhythm Technologies's ROIC was -54.7, while its WACC came in at 9.17.
Conclusion
In conclusion, the stock of iRhythm Technologies (NASDAQ:IRTC) is believed to be significantly undervalued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 81.57% of 738 companies in the Medical Devices & Instruments industry. To learn more about iRhythm Technologies stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
