Unveiling Zebra Technologies (ZBRA)'s Value: Is It Really Priced Right? A Comprehensive Guide
Zebra Technologies Corp (NASDAQ:ZBRA) recently experienced a daily loss of -5.29 % and a 3-month loss of -5.51%. Its Earnings Per Share (EPS) stands at 12.51. The question that arises for investors is whether the stock is modestly undervalued, and if so, what this implies for its future performance. This article provides an in-depth valuation analysis of Zebra Technologies (NASDAQ:ZBRA), and encourages readers to delve deeper into the company's financials and market position.
Company Introduction
Zebra Technologies is a leading provider of automatic identification and data capture technology to enterprises. Its solutions include barcode printers and scanners, mobile computers, and workflow optimization software. The firm primarily serves the retail, transportation logistics, manufacturing, and healthcare markets, designing custom solutions to improve efficiency at its customers. The current stock price is $257.97, while the estimated fair value (GF Value) is $363.19. This discrepancy paves the way for a deeper exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, 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 provides an overview of the fair trading value of the stock. If the stock price 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.
Zebra Technologies (NASDAQ:ZBRA) is currently considered modestly undervalued according to GuruFocus' valuation method. At its current price of $257.97 per share, Zebra Technologies stock is believed to be modestly undervalued, suggesting that the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it is crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Zebra Technologies has a cash-to-debt ratio of 0.03, which ranks worse than 98.09% of 2351 companies in the Hardware industry. The overall financial strength of Zebra Technologies is 6 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. Zebra Technologies has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $5.50 billion and Earnings Per Share (EPS) of $12.51. Its operating margin is 16.76%, ranking better than 89.71% of 2420 companies in the Hardware industry. Overall, the profitability of Zebra Technologies is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. Zebra Technologies's 3-year average revenue growth rate is better than 67.01% of 2313 companies in the Hardware industry. Zebra Technologies's 3-year average EBITDA growth rate is 11.2%, which ranks better than 50.88% of 1938 companies in the Hardware 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, Zebra Technologies's ROIC was 11.67, while its WACC came in at 13.3.
Conclusion
In summary, Zebra Technologies (NASDAQ:ZBRA) is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 50.88% of 1938 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.
