Five9 Inc (FIVN, Financial) recently exhibited a daily gain of 5.23%, coupled with a modest 3-month gain of 1.23%. Despite these positive indicators, the company reports a Loss Per Share of $1.15. These figures prompt a deeper investigation into whether Five9 is significantly undervalued. This valuation analysis aims to uncover the true worth of Five9's stock. Read on to delve into the financial nuances that could influence your investment decisions.
Company Introduction
Five9 Inc (FIVN, Financial) is a leading provider of cloud-native contact center software that facilitates digital customer service, sales, and marketing engagement. The company's innovative Virtual Contact Center platform merges core telephony functionality with omnichannel engagement and various modules, creating a comprehensive cloud contact-center-as-a-service (CCaaS) platform. Modules include digital self-service, agent assist technology, workflow automation, and workforce optimization solutions, all designed to enhance call center efficiency and manage interaction quality and agent performance.
At a current price of $72.67 per share and a market cap of $5.30 billion, Five9's stock price stands in stark contrast to the GuruFocus Fair Value (GF Value) of $139.9, suggesting that the stock may be significantly undervalued. The income breakdown of Five9 further illustrates the company's financial landscape:
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance projections. According to this measure, Five9 (FIVN, Financial) is significantly undervalued, indicating that the stock could potentially offer a higher long-term return than its business growth alone might suggest. The GF Value chart underscores this valuation:
Financial Strength
Evaluating a company's financial strength is crucial before investing. Five9's cash-to-debt ratio of 0.88 places it below the median for the Software industry, indicating a fair financial strength rating of 5 out of 10. The following chart displays Five9's debt and cash over recent years:
Profitability and Growth
Investing in profitable companies generally carries less risk. Five9, however, has struggled with profitability, showing a Loss Per Share of $1.15 over the past year and an operating margin of -10.6%. This performance is weaker than 68.77% of its peers in the Software industry, leading to a poor profitability rank. On the growth front, Five9's average annual revenue growth is commendable at 27%, outpacing 82.11% of its industry counterparts. However, its 3-year average EBITDA growth rate stands at 0%, which is not competitive within its sector.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to the capital invested. Five9's ROIC of -15.36 is significantly lower than its WACC of 9.66, suggesting that the company is not generating sufficient cash flow relative to its capital investment. Here is the historical ROIC vs WACC comparison for Five9:
Conclusion
Overall, Five9 (FIVN, Financial) stock appears to be significantly undervalued. The company's financial condition is fair, but its profitability is poor, and its growth ranks poorly compared to industry peers. For a more detailed look at Five9's financials, visit the 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.
