PAR Technology Corp (PAR, Financial) has been gaining attention recently with a daily gain of 3.8% and a three-month gain of 21.74%. Despite this, the company reported a Loss Per Share of 2.59. The question on many investors' minds is: Is the stock modestly undervalued? This article aims to provide a thorough valuation analysis of PAR Technology. Read on to discover more.
Company Introduction
PAR Technology Corp, together with its subsidiaries, operates in the management technology solutions sector. The company provides software, hardware, and related services integral to the point-of-sale infrastructure and task management. It also offers information gathering, assimilation and communication services. The company operates in two segments: Restaurant/Retail and Government. The former provides point-of-sale and management technology solutions to the restaurant and retail industries, while the latter offers intelligence, surveillance, and reconnaissance solutions and mission systems support. The majority of its revenues are derived from the Restaurant/ Retail segment.
As of October 2, 2023, the company's stock price stands at $40.01, while the estimated fair value (GF Value) is $49.92. This suggests that the stock might be trading below its intrinsic value.
Understanding GF Value
The GF Value is a proprietary measure that estimates a stock's intrinsic value. This value is calculated based on historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line, displayed on our summary page, gives an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, PAR Technology appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. PAR Technology's cash-to-debt ratio stands at 0.22, which is lower than 85.41% of the companies in the Software industry. This indicates that the company's financial strength is poor.
Profitability and Growth
Investing in profitable companies carries less risk. PAR Technology, however, has only been profitable for 2 years over the past 10 years. Its operating margin of -18.66% is worse than 73.55% of the companies in the Software industry. This indicates that the company's profitability is poor.
Growth is a crucial factor in a company's valuation. PAR Technology's 3-year average revenue growth rate is worse than 59.82% of the companies in the Software industry. Its 3-year average EBITDA growth rate is -26%, ranking worse than 85.16% of the companies in the Software industry. This shows that the company's growth is poor.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also provide insights into its profitability. PAR Technology's ROIC is -11.03, while its WACC is 10.2.
Conclusion
In conclusion, PAR Technology's stock appears to be modestly undervalued. However, the company's financial condition and profitability are poor, and its growth ranks worse than 85.16% of the companies in the Software industry. For more information about PAR Technology's stock, you can check out its 30-Year Financials here.
To find high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
