Helios Technologies Inc (HLIO, Financial) experienced a daily loss of -24.53%, with a 3-month loss of -33.44%. Despite these losses, the company posted an Earnings Per Share (EPS) of 2.1. This raises the question: is the stock significantly undervalued? This article aims to provide a comprehensive valuation analysis of Helios Technologies (HLIO). We encourage you to delve into the analysis below to gain insights into the company's intrinsic value.
Company Overview
Helios Technologies Inc is a US-based industrial technology company that develops, manufactures, and markets solutions for the hydraulics and electronics markets. It operates under two business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic cartridge valves, hydraulic quick release couplings as well as engineers complete hydraulic systems. The Electronics segment designs and manufactures customized electronic controls systems and displays for a variety of end markets including industrial and mobile, recreational and health and wellness.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. If the stock price 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.
The stock of Helios Technologies gives every indication of being significantly undervalued based on GuruFocus' valuation method. GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. At its current price of $39.87 per share, Helios Technologies has a market cap of $1.30 billion and the stock gives every indication of being significantly undervalued.
Because Helios Technologies is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Helios Technologies has a cash-to-debt ratio of 0.07, which is worse than 93.63% of 2858 companies in the Industrial Products industry. GuruFocus ranks the overall financial strength of Helios Technologies at 5 out of 10, which indicates that the financial strength of Helios Technologies is fair.
Profitability and Growth
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. Helios Technologies has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $844 million and Earnings Per Share (EPS) of $2.1. Its operating margin is 12.53%, which ranks better than 75.03% of 2903 companies in the Industrial Products industry. Overall, the profitability of Helios Technologies is ranked 8 out of 10, which indicates strong profitability.
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. Helios Technologies's 3-year average revenue growth rate is better than 74.32% of 2738 companies in the Industrial Products industry. Helios Technologies's 3-year average EBITDA growth rate is 14.1%, which ranks better than 58.42% of 2429 companies in the Industrial Products industry.
ROIC vs WACC
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, Helios Technologies's ROIC was 6.47, while its WACC came in at 10.91.
Conclusion
In conclusion, the stock of Helios Technologies (HLIO, Financial) gives every indication of being significantly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 58.42% of 2429 companies in the Industrial Products industry. To learn more about Helios Technologies stock, you can check out 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.
