Unveiling NV5 Global (NVEE)'s Value: Is It Really Priced Right? A Comprehensive Guide
With a daily gain of 4.24% and a 3-month loss of 9.84%, NV5 Global Inc (NASDAQ:NVEE) has been a topic of interest among value investors. The company's Earnings Per Share (EPS) stands at 2.96, suggesting a modest undervaluation. This article aims to provide an in-depth analysis of NV5 Global's intrinsic value, financial health, and future prospects. Let's delve in to unravel the true worth of NV5 Global.
Company Overview
NV5 Global Inc is a provider of technology, conformity assessment, and consulting solutions to public and private sector clients in the infrastructure, utility services, construction, real estate, environmental, and geospatial markets. The company operates nationwide and abroad, serving a diverse clientele that includes U.S. Federal, state and local governments, as well as the private sector. The company's revenue primarily derives from the Infrastructure segment.
Unveiling the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides 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. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on GuruFocus' valuation method, NV5 Global (NASDAQ:NVEE) is believed to be modestly undervalued. The stock's fair value is estimated based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. At its current price of $99.73 per share, NV5 Global has a market cap of $1.60 billion, suggesting a modest undervaluation. Given this, the long-term return of NV5 Global's stock is likely to be higher than its business growth.
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Assessing Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can provide insights into a company's financial health. NV5 Global's cash-to-debt ratio is 0.12, which is worse than 84.57% of 1601 companies in the Construction industry. The overall financial strength of NV5 Global is 7 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. NV5 Global has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $800.90 million and Earnings Per Share (EPS) of $2.96. Its operating margin is 7.55%, which ranks better than 66.28% of 1625 companies in the Construction industry. Overall, the profitability of NV5 Global is ranked 9 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of NV5 Global is 8.2%, which ranks better than 65.7% of 1551 companies in the Construction industry. The 3-year average EBITDA growth is 16.6%, which ranks better than 71.09% of 1318 companies in the Construction industry.
ROIC vs WACC
Another way to assess the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, NV5 Global's return on invested capital is 5.8, and its cost of capital is 12.43.
Conclusion
Overall, NV5 Global (NASDAQ:NVEE) stock is believed to be modestly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 71.09% of 1318 companies in the Construction industry. To learn more about NV5 Global stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
