Unveiling Zebra Technologies (ZBRA)'s Value: Is It Really Priced Right? A Comprehensive Guide
Despite a day's loss of -4.7% and a 3-month loss of -12.08%, Zebra Technologies Corp (NASDAQ:ZBRA) presents an interesting investment case. With an Earnings Per Share (EPS) of 12.51, the question arises: is the stock significantly undervalued? This article provides an in-depth valuation analysis of Zebra Technologies (NASDAQ:ZBRA), guiding potential investors and members of GuruFocus.com.
Company Introduction
Zebra Technologies is a leading provider of automatic identification and data capture technology to enterprises. The firm primarily serves the retail, transportation logistics, manufacturing, and healthcare markets, designing custom solutions to improve efficiency at its customers. With a current stock price of $240.33 and a market cap of $12.30 billion, Zebra Technologies Corp (NASDAQ:ZBRA) appears to be significantly undervalued when compared to the GF Value of $358.78.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. 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 the GF Value, Zebra Technologies (NASDAQ:ZBRA) appears to be significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Zebra Technologies has a cash-to-debt ratio of 0.03, which is worse than 98.02% of 2376 companies in the Hardware industry. GuruFocus ranks the overall financial strength of Zebra Technologies at 6 out of 10, which indicates that the financial strength of Zebra Technologies is fair.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Zebra Technologies has been profitable 8 over the past 10 years. Its operating margin is 16.76%, which ranks better than 89.46% of 2448 companies in the Hardware industry. Overall, the profitability of Zebra Technologies is ranked 8 out of 10, which indicates strong profitability.
Growth is one of the most important factors in the valuation of a company. The average annual revenue growth of Zebra Technologies is10.2%, which ranks better than 66.81% of 2338 companies in the Hardware industry. The 3-year average EBITDA growth is 11.2%, which ranks better than 50.92% of 1964 companies in the Hardware industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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, Zebra Technologies's return on invested capital is 11.67, and its cost of capital is 13.23.
Conclusion
In conclusion, the stock of Zebra Technologies (NASDAQ:ZBRA) gives every indication of being significantly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 50.92% of 1964 companies in the Hardware industry. To learn more about Zebra Technologies stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
