Endava PLC (DAVA, Financial) recently recorded a daily gain of 4.64% and a 3-month gain of 7.8%. With an Earnings Per Share (EPS) (EPS) of 1.96, the question arises: is the stock significantly undervalued? This article provides an in-depth valuation analysis to answer this question. Read on to discover the intrinsic value of Endava PLC (DAVA).
Introduction to Endava PLC
Endava PLC is a leading provider of technology solutions. The company offers a variety of services including Agile Transformation, Digital Evolution and Automation, Test Automation and Engineering, Cloud, Architecture, Software Engineering, and more. These services cater to diverse industries such as Finance, Retail and Consumer Goods, Telecommunication, Media and Technology, Insurance, and Healthcare.
Endava PLC (DAVA, Financial) is currently trading at $55.45 per share, with a market cap of $3.20 billion. However, the GuruFocus Fair Value (GF Value) estimation stands at $143.97, indicating that the stock may be significantly undervalued. Let's delve deeper into the company's value.
Understanding the GF Value
The GF Value is a proprietary valuation model developed by GuruFocus. It calculates the intrinsic value of a stock based on historical trading multiples, an adjustment factor based on past business performance and growth, and future business performance estimates. The GF Value Line on the summary page offers an overview of the fair value at which the stock should ideally be traded.
According to the GF Value, Endava PLC 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.
Assessing Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company's financial strength before deciding whether to buy shares. Endava PLC has a cash-to-debt ratio of 2.39, which ranks worse than 50.95% of 2742 companies in the Software industry. Despite this, GuruFocus ranks Endava PLC's financial strength as 9 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk for investors. Endava PLC has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $958.80 million and Earnings Per Share (EPS) of $1.96. Its operating margin is 14.3%, which ranks better than 81.26% of 2769 companies in the Software industry. Overall, the profitability of Endava PLC is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of Endava PLC is 30.2%, which ranks better than 84.27% of 2397 companies in the Software industry. The 3-year average EBITDA growth rate is 50.4%, which ranks better than 89.21% of 1993 companies in the Software industry.
ROIC vs WACC
A useful way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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, Endava PLC's ROIC was 21.92, while its WACC came in at 11.62.
Conclusion
In conclusion, the stock of Endava PLC (DAVA, Financial) shows every sign of being significantly undervalued. The company's financial condition is strong and its profitability is robust. Its growth ranks better than 89.21% of 1993 companies in the Software industry. To learn more about Endava PLC stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
