Keysight Technologies Inc (KEYS, Financial) recently experienced a daily loss of 6.73%, yet its 3-month performance shows a gain of 7.01%. With an Earnings Per Share (EPS) of $5.45, investors are prompted to consider whether the company is modestly undervalued. This article sets out to explore Keysight Technologies Inc (KEYS)'s valuation, offering a detailed analysis to determine if the current market price reflects the company's intrinsic value. Read on to understand our valuation analysis of Keysight Technologies.
Company Overview
Keysight Technologies is a leader in testing and measurement solutions, serving a diverse clientele, including electronics OEMs, government agencies, and the automotive industry. With a commitment to accelerating innovation and enhancing productivity, Keysight Technologies supports over 30,000 customers worldwide. Currently, the stock is trading at $144.04, against a GF Value of $178.65, suggesting that the company might be modestly undervalued. This initial comparison sets the stage for a deeper dive into the intrinsic value of Keysight Technologies.
Understanding GF Value
The GF Value is a unique measure that reflects the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and projected future business performance. The GF Value Line serves as a benchmark for the fair market value of a stock. If a stock's price significantly deviates from this line, it suggests a potential misalignment with its intrinsic value. For Keysight Technologies (KEYS, Financial), with a market cap of $25.20 billion, the current price suggests that the stock may be modestly undervalued, offering a potentially higher long-term return than its business growth alone might indicate.
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Financial Strength
Evaluating a company's financial strength is crucial to avoid the risk of permanent capital loss. Keysight Technologies' cash-to-debt ratio of 0.85 ranks in the lower half of the Hardware industry, yet its overall financial strength is rated a robust 8 out of 10. This strong financial foundation is depicted in the company's historical debt and cash flow.
Profitability and Growth
Keysight Technologies has a consistent track record of profitability, with 10 years of profits over the past decade. The company boasts a remarkable operating margin of 23.53%, outperforming 96.43% of its industry peers. Its profitability is deemed strong, with a revenue of $5.30 billion and an EPS of $5.45 over the past year. Additionally, Keysight Technologies' growth is noteworthy, with a 3-year average annual revenue growth of 11%, ranking well within the Hardware industry.
ROIC vs. WACC
Another angle to appraise profitability is by comparing the Return on Invested Capital (ROIC) against the Weighted Average Cost of Capital (WACC). Keysight Technologies' ROIC of 16.5 is higher than its WACC of 10.71, indicating effective cash flow generation relative to capital investment. This comparison suggests that Keysight Technologies is creating value for its shareholders.
Conclusion
In summary, Keysight Technologies (KEYS, Financial) appears to be modestly undervalued. The company's financial condition is robust, and its profitability is strong. Its growth ranks favorably compared to its industry counterparts. For a detailed look at Keysight Technologies' financials over the past 30 years, you can view the 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.
