Unveiling Penumbra (PEN)'s Value: Is It Really Priced Right? A Comprehensive Guide
Penumbra Inc (NYSE:PEN) has experienced a daily loss of 5.94% and a 3-month loss of 30.87%. Despite these figures, the company's Earnings Per Share (EPS) stands at 0.74. This raises the question, is the stock significantly undervalued? In this article, we delve into an in-depth analysis of Penumbra's valuation. We encourage you to read on to understand the intrinsic value of this stock.
Company Introduction
Penumbra Inc is a key player in the development and manufacturing of medical devices for the neurovascular and peripheral vascular markets. The majority of its revenue is derived from its neurovascular product category. The company's products are primarily sold to hospitals for use by specialist physicians. Despite its current share price of $219.08, the GF Value, a proprietary measure of a stock's intrinsic value, estimates Penumbra's fair value at $337.84, suggesting that the stock is significantly undervalued.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from GuruFocus' exclusive method. This method takes into account historical trading multiples, a GuruFocus adjustment factor based on the company's 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.
At its current price of $219.08 per share, Penumbra (NYSE:PEN) has a market cap of $8.40 billion. According to the GF Value, the stock is significantly undervalued. This suggests that the long-term return of Penumbra's stock is likely to be much higher than its business growth.
Financial Strength Analysis
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. It is therefore crucial to review a company's financial strength before deciding to invest in its stock. A good starting point is to look at the cash-to-debt ratio and interest coverage. Penumbra's cash-to-debt ratio is 0.96, which is worse than 66.63% of 833 companies in the Medical Devices & Instruments industry. Despite this, GuruFocus ranks Penumbra's overall financial strength at 9 out of 10, indicating that it is strong.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors. Penumbra has been profitable 8 over the past 10 years, with an operating margin of 3.86%, ranking better than 54.34% of 830 companies in the Medical Devices & Instruments industry. The 3-year average annual revenue growth rate of Penumbra is 14%, which ranks better than 65.34% of 727 companies in the same industry. However, the 3-year average EBITDA growth rate is -19.4%, ranking worse than 83.97% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) offers another perspective on its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business, while WACC is the rate that a company is expected to pay on average to finance its assets. For the past 12 months, Penumbra's ROIC is 2.62, and its WACC is 6.41.
Conclusion
In conclusion, Penumbra's stock is estimated to be significantly undervalued. The company's financial condition is strong, and its profitability is fair. However, its growth ranks worse than 83.97% of 730 companies in the Medical Devices & Instruments industry. To learn more about Penumbra stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
