Elastic NV (ESTC, Financial) experienced a daily loss of 2.32%, yet it has seen a notable 3-month gain of 44.83%. With a Loss Per Share of 1.99, investors are keen to understand if the current market price reflects the company's intrinsic value. This analysis aims to determine whether Elastic NV (ESTC) is fairly valued in the market. Read on to explore a detailed valuation analysis of the company.
Company Introduction
Elastic NV is a software company headquartered in Mountain View, California. It specializes in search-adjacent products, with a search engine capable of processing structured and unstructured data to extract insights. The company focuses on enterprise search, observability, and security. A comparison of Elastic NV's stock price of $113.82 to the GF Value of $105.85 will provide a clearer picture of the company's valuation. This valuation is integral to understanding the potential investment opportunity in Elastic NV's stock.
Understanding the GF Value
The GF Value is a unique metric that estimates the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance forecasts. The GF Value Line suggests the stock's fair trading value, around which the price is expected to fluctuate. If the stock price is significantly higher than the GF Value Line, the stock is considered overvalued, and vice versa.
Elastic NV (ESTC, Financial) is currently estimated to be fairly valued according to the GuruFocus Value calculation. With a market cap of $11.30 billion and a stock price close to the GF Value, the long-term return of Elastic NV's stock is likely to align with the company's business growth rate.
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Financial Strength Assessment
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Key indicators such as the cash-to-debt ratio and interest coverage offer insights into a company's financial robustness. Elastic NV's cash-to-debt ratio stands at 1.63, positioning it lower than 56.36% of its peers in the Software industry. The company's financial strength is deemed fair with a GuruFocus rating of 5 out of 10.
Profitability and Growth Prospects
Companies with consistent profitability tend to be less risky investments. High profit margins often indicate better performance potential. Elastic NV has not been profitable in the past 10 years, with a Loss Per Share of $1.99 and an operating margin of -11.67%, which is below 69.52% of the companies in the Software industry. The company's profitability is ranked as poor by GuruFocus.
Growth is a vital factor in company valuation, closely linked to long-term stock performance. Elastic NV's 3-year average annual revenue growth rate is 27.2%, ranking better than 82.38% of companies in the Software industry. However, its 3-year average EBITDA growth rate of 3.3% ranks lower than 60.74% of its industry peers.
ROIC vs. WACC Analysis
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to the capital invested. If ROIC exceeds WACC, value is likely being created for shareholders. Elastic NV's ROIC is -16.09, which is below its WACC of 6.8, suggesting the company is not currently creating shareholder value.
Conclusion
In conclusion, Elastic NV (ESTC, Financial) is estimated to be fairly valued. The company has fair financial health but poor profitability. Its growth is subpar compared to 60.74% of companies in the Software industry. For a deeper dive into Elastic NV's financials, you can view 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.
