Vertiv Holdings Co (VRT, Financial) has seen a daily gain of 2.96% and a 3-month gain of 54.16%. The company's Earnings Per Share (EPS) (EPS) stands at 0.47. However, is the stock significantly overvalued? This article aims to answer that question by providing a thorough valuation analysis. Read on to gain a deeper understanding of Vertiv Holdings Co's financial health and its intrinsic value.
About Vertiv Holdings Co
Vertiv Holdings Co is a leading provider of hardware, software, analytics, and ongoing services for vital applications. The company's solutions ensure continuous, optimal performance and growth for its customers' businesses. Vertiv Holdings Co addresses the significant challenges faced by data centers, communication networks, and commercial and industrial facilities. Its portfolio includes power, cooling, and IT infrastructure solutions and services that extend from the cloud to the network's edge. The company operates across three business segments: the Americas, Asia Pacific, and Europe, Middle East & Africa.
Vertiv Holdings Co's current stock price is $38.3, with a market cap of $14.60 billion. However, its GF Value, an estimation of fair value, stands at $25.08. This discrepancy sets the stage for a deeper exploration of the company's value. Here's a look at the income breakdown of Vertiv Holdings Co:
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
The stock of Vertiv Holdings Co is estimated to be significantly overvalued, according to GuruFocus' valuation method. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued, and its future returns could be poor. Conversely, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued, and its future returns could be higher.
Given that Vertiv Holdings Co is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
Financial Strength of Vertiv Holdings Co
A company's financial strength is critical to avoid the risk of permanent capital loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Vertiv Holdings Co has a cash-to-debt ratio of 0.09, ranking worse than 92.53% of 2839 companies in the Industrial Products industry. The overall financial strength of Vertiv Holdings Co is 5 out of 10, indicating fair financial strength.
This is the debt and cash of Vertiv Holdings Co over the past years:
Profitability and Growth
Consistent profitability over the long term reduces the risk for investors. 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 63.84% of 2893 companies in the Industrial Products industry. Overall, the profitability of Vertiv Holdings Co is ranked 4 out of 10, indicating poor profitability.
Growth is a crucial factor in a company's valuation. Faster-growing companies create more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Vertiv Holdings Co is 0%, which ranks worse than 0% of 2734 companies in the Industrial Products industry. The 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 2425 companies in the Industrial Products industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital (ROIC) and the 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. Ideally, ROIC should be higher than WACC. For the past 12 months, Vertiv Holdings Co's ROIC is 6.28, and its WACC is 12.62.
The historical ROIC vs WACC comparison of Vertiv Holdings Co is shown below:
Conclusion
In summary, the stock of Vertiv Holdings Co is estimated to be significantly overvalued. The company's financial condition is fair, but its profitability is poor. Its growth ranks worse than 0% of 2425 companies in the Industrial Products industry. To learn more about Vertiv Holdings Co stock, you can check out its 30-Year Financials here.
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