With Synaptics Inc (SYNA, Financial) experiencing a daily gain of 10.75% and a 3-month gain of 7.73%, investors are keenly observing its market performance. The company's Earnings Per Share (EPS) stand at 1.81, prompting the question: is the stock modestly overvalued? This article dives deep into the valuation analysis of Synaptics, providing investors with a detailed understanding of its current market position.
Company Introduction
Synaptics Inc is a significant player in the semiconductor solutions market, focusing on the mobile, PC, and Internet of Things sectors. With a strong presence in China, Synaptics specializes in developing human interface solutions that enhance the user experience across various electronic devices. The current stock price of $98.01 and a market cap of $3.80 billion suggest a modest overvaluation when compared to the GF Value, an estimation of the fair value at $87.1. This valuation sets the stage for a deeper exploration of Synaptics' intrinsic value, combining financial analysis with key company insights.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated using historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. This value serves as a benchmark, suggesting that stocks trading significantly above this line are likely overvalued, while those below may present better return prospects. Synaptics (SYNA, Financial) is currently trading above the GF Value Line, indicating modest overvaluation and potentially lower future returns compared to its business growth.
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Financial Strength
Before investing, assessing a company's financial strength is crucial. Companies with robust financial health pose lower risks of permanent loss. Synaptics' cash-to-debt ratio of 0.8 places it below 68.65% of its peers in the Semiconductors industry. However, with an overall financial strength rating of 6 out of 10, Synaptics maintains a fair financial position.
Profitability and Growth
Long-term profitability is a less risky proposition for investors, and Synaptics has maintained profitability for 8 out of the past 10 years. With an annual revenue of $1.40 billion and an Earnings Per Share (EPS) of $1.81, its operating margin of 1.32% ranks below 64.99% of competitors. This places Synaptics' profitability at a fair level, with a ranking of 6 out of 10.
The company's growth is also a vital factor, as it is closely tied to long-term stock performance. Unfortunately, Synaptics' 3-year average annual revenue growth rate of -4.2% is lower than 81.21% of its industry peers. Its 3-year average EBITDA growth rate of 5.1% also falls short when compared to other companies in the Semiconductors industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) helps gauge a company's profitability relative to its invested capital. Synaptics' ROIC of 2.37% is significantly lower than its WACC of 12.36%, indicating challenges in creating value for shareholders.
Conclusion
In summary, Synaptics (SYNA, Financial) appears modestly overvalued based on its current stock price. The company's financial condition and profitability are fair, but its growth lags behind a significant portion of the semiconductor industry. For a more detailed insight into Synaptics' financials, investors can explore its 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.
