The stock of AgEagle Aerial Systems (AMEX:UAVS, 30-year Financials) shows every sign of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $6.11 per share and the market cap of $381.8 million, AgEagle Aerial Systems stock is estimated to be significantly overvalued. GF Value for AgEagle Aerial Systems is shown in the chart below.
Because AgEagle Aerial Systems is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 4.6% over the past five years.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. AgEagle Aerial Systems has a cash-to-debt ratio of 65.77, which is better than 88% of the companies in Aerospace & Defense industry. The overall financial strength of AgEagle Aerial Systems is 7 out of 10, which indicates that the financial strength of AgEagle Aerial Systems is fair. This is the debt and cash of AgEagle Aerial Systems over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. AgEagle Aerial Systems has been profitable 3 over the past 10 years. Over the past twelve months, the company had a revenue of $1.3 million and loss of $0.37 a share. Its operating margin is -384.03%, which ranks in the bottom 10% of the companies in Aerospace & Defense industry. Overall, the profitability of AgEagle Aerial Systems is ranked 2 out of 10, which indicates poor profitability. This is the revenue and net income of AgEagle Aerial Systems over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. AgEagle Aerial Systems's 3-year average revenue growth rate is in the middle range of the companies in Aerospace & Defense industry. AgEagle Aerial Systems's 3-year average EBITDA growth rate is 8.2%, which ranks in the middle range of the companies in Aerospace & Defense industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, AgEagle Aerial Systems's return on invested capital is -123.20, and its cost of capital is 33.59. The historical ROIC vs WACC comparison of AgEagle Aerial Systems is shown below:
In short, AgEagle Aerial Systems (AMEX:UAVS, 30-year Financials) stock is estimated to be significantly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the middle range of the companies in Aerospace & Defense industry. To learn more about AgEagle Aerial Systems stock, you can check out its 30-year Financials here.
To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.
