The stock of Kraken Robotics (OTCPK:KRKNF, 30-year Financials) shows every sign of being modestly undervalued, 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 $0.465 per share and the market cap of $77.3 million, Kraken Robotics stock appears to be modestly undervalued. GF Value for Kraken Robotics is shown in the chart below.
Because Kraken Robotics is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 26.5% over the past five years.
Link: These companies may deliever higher future returns at reduced risk.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company’s financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Kraken Robotics has a cash-to-debt ratio of 1.74, which which ranks in the middle range of the companies in Hardware industry. The overall financial strength of Kraken Robotics is 5 out of 10, which indicates that the financial strength of Kraken Robotics is fair. This is the debt and cash of Kraken Robotics over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Kraken Robotics has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $7.3 million and loss of $0.042 a share. Its operating margin is -62.58%, which ranks in the bottom 10% of the companies in Hardware industry. Overall, the profitability of Kraken Robotics is ranked 2 out of 10, which indicates poor profitability. This is the revenue and net income of Kraken Robotics 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. Kraken Robotics’s 3-year average revenue growth rate is better than 94% of the companies in Hardware industry. Kraken Robotics’s 3-year average EBITDA growth rate is -1.3%, which ranks in the middle range of the companies in Hardware industry.
Another way to evaluate a company’s profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Kraken Robotics’s ROIC was -39.70, while its WACC came in at 12.55. The historical ROIC vs WACC comparison of Kraken Robotics is shown below:
In short, the stock of Kraken Robotics (OTCPK:KRKNF, 30-year Financials) gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the middle range of the companies in Hardware industry. To learn more about Kraken Robotics 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.
