Perficient Inc (PRFT, Financial), a key player in the information technology and consulting services sector, has recently experienced a significant daily gain of 12.89%. Despite a 3-month loss of -9.22%, the company's Earnings Per Share (EPS) stands at 2.86. This raises the question: is the stock significantly undervalued? In this article, we delve into a comprehensive valuation analysis of Perficient (PRFT), offering valuable insights for potential investors.
Company Overview
Perficient Inc provides a diverse range of information technology and consulting services, focusing on digital experience, business optimization, and IT solutions. The company's services include big data analytics, technology platform implementations, enterprise content management, portals and collaboration, management consulting, custom applications, business integration, business process management, and customer relationship management. Perficient primarily serves the healthcare, financial services, retail, and electronics industries, with the majority of its revenue generated within the United States.
With a current stock price of $58.16 and a market cap of $2 billion, Perficient's value is compared with the GF Value, a proprietary measure of a stock's intrinsic value. This comparison sets the stage for a deeper exploration of the company's value, ingeniously integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Perficient (PRFT, Financial) stock is estimated to be significantly undervalued based on the GuruFocus Value calculation. Given that Perficient is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Assessing Financial Strength
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 understand its financial strength. Perficient has a cash-to-debt ratio of 0.14, which ranks worse than 89.27% of 2739 companies in the Software industry. The overall financial strength of Perficient is 7 out of 10, indicating that the financial strength of Perficient is fair.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Perficient has been profitable 10 years over the past decade. Over the past twelve months, the company had a revenue of $922.70 million and Earnings Per Share (EPS) of $2.86. Its operating margin is 15.8%, which ranks better than 83.98% of 2765 companies in the Software industry. Overall, GuruFocus ranks the profitability of Perficient at 9 out of 10, indicating strong profitability.
Growth is one of the most important factors in the valuation of a company. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Perficient is 12%, which ranks better than 59.12% of 2397 companies in the Software industry. The 3-year average EBITDA growth is 27%, which ranks better than 75.49% of 1991 companies in the Software industry.
ROIC Vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average 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 return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Perficient's ROIC is 11.81 while its WACC came in at 10.32.
Conclusion
Overall, Perficient (PRFT, Financial) stock is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 75.49% of 1991 companies in the Software industry. To learn more about Perficient 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.
