Unveiling Synaptics (SYNA)'s Value: Is It Really Priced Right? A Comprehensive Guide
With a day's loss of -3.24%, a 3-month gain of 2.75%, and an Earnings Per Share (EPS) of 1.81, Synaptics (NASDAQ:SYNA) appears to be modestly undervalued. This article aims to delve into the intricacies of Synaptics' valuation and financial strength to provide a comprehensive understanding of its current market position. Read on for a detailed analysis.
An Introduction to Synaptics Inc (NASDAQ:SYNA)
Synaptics Inc is a prominent global producer of semiconductor solutions for the mobile, PC, and Internet of Things markets. The company has developed human interface solutions that enable touch, display, fingerprint, video, audio, voice, AI, and connectivity functions for various electronic devices. With a majority of its revenue derived from China, Synaptics has a strong presence in the semiconductor industry. The company's stock price currently stands at $83.74, while the GF Value, an estimation of its fair value, is $99.41.
Understanding the GF Value of Synaptics (NASDAQ:SYNA)
The GF Value is an exclusive measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. For Synaptics, the GF Value indicates that the stock is modestly undervalued. This is based on its current market cap of $3.30 billion and a stock price of $83.74 per share. Consequently, the long-term return of Synaptics' stock is likely to be higher than its business growth.
Financial Strength of Synaptics
Investing in companies with strong financial strength reduces the risk of permanent capital loss. A company's cash-to-debt ratio and interest coverage provide insights into its financial strength. Synaptics has a cash-to-debt ratio of 0.91, which is lower than 67.67% of 894 companies in the Semiconductors industry. With an overall financial strength rank of 6 out of 10, Synaptics' financial strength is fair.
Profitability and Growth of Synaptics
Investing in profitable companies typically involves less risk. Synaptics has been profitable 8 years over the past 10 years, with revenues of $1.40 billion and Earnings Per Share (EPS) of $1.81 in the past 12 months. Its operating margin of 11.39% is better than 64.18% of 938 companies in the Semiconductors industry. However, the 3-year average annual revenue growth of Synaptics is -4.2%, which ranks worse than 81% of 863 companies in the Semiconductors industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can provide insights into its profitability. For Synaptics, the ROIC is 5.47, and the WACC is 11.8, indicating that the company is not creating value for shareholders.
Conclusion
In conclusion, Synaptics (NASDAQ:SYNA) appears to be modestly undervalued. The company's financial condition and profitability are fair, but its growth ranks lower than 73.89% of 766 companies in the Semiconductors industry. For more details about Synaptics' stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
