With a notable daily gain of 5.09% and a three-month gain of 27.23%, Endava PLC (DAVA, Financial) presents a compelling case for investors seeking value. The company's Earnings Per Share (EPS) stands at 1.96, but the pressing question remains: is the stock significantly undervalued? This article delves into the valuation analysis of Endava PLC to provide investors with a clearer picture of its market position.
Company Introduction
Endava PLC offers a suite of technology solutions, including Agile Transformation, Digital Evolution, Automation, and Cloud services, catering to diverse sectors such as finance, retail, telecommunications, and healthcare. Despite its current share price of $59.86, the GF Value suggests a fair value of $144.64, indicating a potential undervaluation. This introduction sets the stage for a deeper analysis of Endava PLC's intrinsic value.
Summarize GF Value
The GF Value is a bespoke measure of intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. When a stock's price significantly diverges from the GF Value Line, it suggests overvaluation or undervaluation, influencing future returns. Endava PLC's market cap of $3.50 billion and its price considerably below the GF Value Line suggest that the stock is significantly undervalued, potentially offering higher long-term returns than its business growth rate.
Financial Strength
Investing in companies with robust financial strength is crucial to avoid permanent capital loss. Endava PLC's cash-to-debt ratio of 2.39, although middling in its industry, still reflects a solid financial foundation. This is supported by a financial strength rating of 9 out of 10 from GuruFocus.
Profitability and Growth
Endava PLC's consistent profitability and high profit margins over the past decade make it an attractive investment. With a revenue of $958.80 million and an operating margin of 14.3%, the company outperforms 81.2% of its peers in the software industry. Moreover, Endava PLC's impressive growth, with an average annual revenue increase of 30.2%, ranks favorably within the industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) offers insights into profitability. Endava PLC's ROIC of 21.92 is nearly double its WACC of 11.61, indicating efficient capital utilization.
Conclusion
In summary, Endava PLC (DAVA, Financial) appears to be significantly undervalued. The company boasts a strong financial condition and robust profitability, with growth rates that are impressive within the Software industry. Investors keen on understanding Endava PLC's financials in-depth can explore 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.
