Impinj Inc (PI, Financial) has recently been under the spotlight with a significant daily gain of 28.65% and a three-month gain of 52.98%. Despite these impressive figures, the company has reported a Loss Per Share of $0.35. Investors and analysts are keen on understanding whether Impinj (PI) is significantly overvalued at its current price. To address this question, we delve into a detailed valuation analysis that will shed light on the true intrinsic value of Impinj (PI).
Impinj Inc operates a sophisticated platform that enables wireless connectivity to everyday items, providing crucial data such as identity, location, and authenticity to various applications. The company's innovative technology has positioned it as a leader in the realm of endpoint integrated circuits (ICs) and connectivity solutions. With a significant presence in the Asia Pacific region, Impinj has established a strong market foothold. However, when juxtaposed with the GF Value of $101.86, which suggests the stock's fair value, Impinj's recent trading price of $155.55 and a market cap of $4.20 billion raises questions about its valuation. Is the stock's current market price justified, or is it a case of overvaluation? The following analysis aims to unravel this conundrum.
Understanding the GF Value
The GF Value is an exclusive metric that estimates the intrinsic value of a stock. It is derived from a combination of historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projected future business performance. This value serves as a benchmark for what the stock should ideally trade at. If the stock price significantly exceeds the GF Value, it suggests overvaluation, potentially leading to poor future returns. Conversely, if the stock price is well below the GF Value, it may indicate undervaluation, presenting an opportunity for higher future returns.
Based on GuruFocus' calculations, Impinj (PI, Financial) is deemed significantly overvalued. The stock's current price far exceeds the GF Value, suggesting that the long-term return on Impinj's stock may not align with the company's future business growth.
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Financial Strength Assessment
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Impinj's cash-to-debt ratio of 0.59 places it in a precarious position compared to 79.23% of its peers in the Hardware industry. This ratio, along with a GuruFocus financial strength rank of 4 out of 10, signals that Impinj's financial health could be better.
Profitability and Growth Prospects
Companies that consistently demonstrate profitability tend to be less risky investments. Impinj, however, has only been profitable for 2 out of the last 10 years. With a Loss Per Share of $0.35 and an operating margin that lags behind 82.46% of its industry counterparts, Impinj's profitability is currently underwhelming.
Nevertheless, growth is a pivotal factor in a company's valuation. Impinj's 3-year average annual revenue growth rate of 23.6% is commendable, ranking well within its industry. Additionally, its EBITDA growth rate of 18.3% indicates a potential for value creation for shareholders, assuming the growth is profitable.
ROIC vs. WACC: A Profitability Indicator
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to its capital costs. A higher ROIC compared to WACC suggests value creation for shareholders. Unfortunately, Impinj's ROIC of -21.02 is significantly lower than its WACC of 13.5, indicating that the company is not generating sufficient returns on its investments.
Conclusion
In conclusion, the current valuation of Impinj (PI, Financial) appears to be significantly overvalued when considering its GF Value. The company's financial condition and profitability are less than ideal, even though its growth metrics show promise. Investors interested in Impinj should carefully weigh these factors and consider the company's comprehensive 30-Year Financials before making any investment decisions.
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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.
