As of July 21, 2023, Illumina Inc (ILMN, Financial) experienced a 3.43% gain, with its stock price reaching $190.49. Despite a market cap of $30.1 billion and sales of $4.4 billion, the company reported a loss per share of $-28.53. According to GuruFocus's GF Value calculation, Illumina's stock is potentially a value trap, which warrants a second thought before investment.
Illumina is a leader in the field of genetic analysis, offering tools and services for life science and clinical lab applications. The company's high-throughput technology enables whole genome sequencing in humans and other large organisms. Its lower throughput tools facilitate applications requiring smaller data outputs, such as viral and cancer tumor screening. Illumina also sells microarrays for lower-cost, focused genetic screening with primarily consumer and agricultural applications.
GF Value of Illumina
The GF Value is an innovative indicator of a stock's intrinsic worth, calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. The GF Value Line represents the fair value at which the stock should ideally be traded. Currently, Illumina's GF Value stands at $390.66, indicating that its future return is likely to be poor if the price of the stock is significantly above the GF Value Line.
However, the Piotroski F-score of Illumina is only 3 out of 9, suggesting that the company is experiencing a decline in multiple aspects in the areas of profitability, funding, and efficiency. This low score indicates a potential long-term risk, urging investors to look beyond the low valuation of the company. For more insights on how the Piotroski F-score measures the business trend of a company, please click here.
Financial Strength and Profitability
Before investing in a company, it's crucial to assess its financial strength. Illumina's cash-to-debt ratio is 0.5, ranking it lower than 67.92% of companies in the Medical Diagnostics & Research industry. Overall, the financial strength of Illumina is fair, with a score of 6 out of 10.
Profitability is another key factor to consider. Illumina has been profitable 9 times over the past 10 years. Despite a loss per share of $-28.53 in the past twelve months, its operating margin of 2.38% ranks better than 52.86% of companies in the Medical Diagnostics & Research industry. Overall, the profitability of Illumina is strong, with a score of 8 out of 10.
Growth and ROIC vs WACC
Growth is closely correlated with the long-term performance of a company's stock. Unfortunately, Illumina's 3-year average revenue growth rate is worse than 60.89% of companies in the Medical Diagnostics & Research industry. Its 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of companies in the same industry.
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way to determine its profitability. For the past 12 months, Illumina's ROIC is 0.89, and its WACC is 10.57, implying that the company is not creating value for shareholders.
Conclusion
In conclusion, Illumina (ILMN, Financial) is potentially a value trap. Despite its fair financial condition and strong profitability, its growth ranks worse than 0% of companies in the Medical Diagnostics & Research industry. To learn more about Illumina stock, you can check out its 30-Year Financials here.
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