Vertiv Holdings Co (VRT, Financial) has seen a daily gain of 1.66% and a robust 3-month gain of 84.14%. With an Earnings Per Share (EPS) (EPS) of 0.47, the company appears to be on a positive trajectory. However, the question arises - is the stock significantly overvalued? This article delves into the valuation analysis of Vertiv Holdings Co, providing a comprehensive view of its intrinsic worth. Keep reading to gain valuable insights.
An Overview of Vertiv Holdings Co
Vertiv Holdings Co is a leading company that seamlessly integrates hardware, software, analytics, and ongoing services to ensure its customers' vital applications run continuously, perform optimally, and grow with their business needs. With a portfolio of power, cooling, and IT infrastructure solutions and services, the company addresses the critical challenges faced by data centers, communication networks, and commercial and industrial facilities. Its market presence spans across the Americas, Asia Pacific, and Europe, Middle East & Africa.
Currently, Vertiv Holdings Co's stock is trading at $39.08 per share, significantly higher than its GF Value of $25.08. This discrepancy suggests that the stock might be overvalued. Let's delve deeper into the company's financials to understand its intrinsic value better.
Understanding the GF Value
The GF Value is a proprietary valuation measure by GuruFocus that provides an estimated intrinsic value of a stock. It considers historical multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it indicates an overvalued stock with potential poor future returns. Conversely, if the price is significantly below the GF Value Line, the stock is likely undervalued and could yield higher future returns.
For Vertiv Holdings Co, the stock is considered significantly overvalued. This implies that the long-term return of its stock is likely to be much lower than its future business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength of Vertiv Holdings Co
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Vertiv Holdings Co has a cash-to-debt ratio of 0.09, ranking worse than 92.4% of 2791 companies in the Industrial Products industry. Based on this, GuruFocus ranks Vertiv Holdings Co's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth of Vertiv Holdings Co
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Vertiv Holdings Co has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $6.40 Billion and Earnings Per Share (EPS) of $0.47. Its operating margin is 9.58%, which ranks better than 64.77% of 2799 companies in the Industrial Products industry. Overall, GuruFocus ranks the profitability of Vertiv Holdings Co at 4 out of 10, which indicates poor profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Vertiv Holdings Co is 0%, which ranks worse than 0% of 2672 companies in the Industrial Products industry. The 3-year average EBITDA growth is 0%, which ranks worse than 0% of 2363 companies in the Industrial Products industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Vertiv Holdings Co's ROIC was 6.28, while its WACC came in at 12.44.
Conclusion
In summary, the stock of Vertiv Holdings Co (VRT, Financial) is believed to be significantly overvalued. The company's financial condition is fair, and its profitability is poor. Its growth ranks worse than 0% of 2363 companies in the Industrial Products industry. To learn more about Vertiv Holdings Co stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
