Recent market activity has seen Futu Holdings Ltd (FUTU, Financial) experience a notable daily loss of -5.91%, contributing to a three-month decline of -12.36%. Despite these setbacks, the company boasts a solid Earnings Per Share (EPS) of 3.98. Such financial indicators lead to an important question: Is Futu Holdings modestly undervalued? This article delves into the valuation analysis of Futu Holdings, offering investors a comprehensive look at the stock's potential.
Company Overview
Futu Holdings Ltd (FUTU, Financial) operates as an online brokerage, offering a range of investment services through its digital platform, Futu NiuNiu. This platform serves markets in Hong Kong, Mainland China, Singapore, and the United States, providing market data, trading services, and news feeds. The company's current market cap stands at $7.20 billion, with sales reaching $1.30 billion. The stock price of $51.7 is juxtaposed against the GF Value of $72.41, suggesting a potential undervaluation worth exploring.
Understanding GF Value
The GF Value is a proprietary measure indicating the intrinsic value of a stock, calculated through a unique methodology that includes historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line suggests the stock's ideal trading value. Currently, Futu Holdings (FUTU, Financial) appears modestly undervalued, with the stock price significantly below the GF Value Line, indicating the potential for higher future returns.
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Financial Strength
Investors must consider a company's financial strength to avoid the high risk of permanent capital loss. Key indicators such as the cash-to-debt ratio, which sits at 1.56 for Futu Holdings, provide insight into the company's financial health. Although this ratio ranks below 52.7% of peers in the Capital Markets industry, Futu Holdings' overall financial strength is fair, with a score of 6 out of 10.
Profitability and Growth
Profitable companies are generally considered safer investments, and Futu Holdings has demonstrated consistent profitability with an impressive operating margin of 51.47%, outperforming 83.46% of its industry counterparts. The company's profitability rank is a robust 8 out of 10. In terms of growth, Futu Holdings shines with a 3-year average annual revenue growth rate of 79%, placing it ahead of 92.46% of industry competitors.
ROIC vs. WACC
An effective measure of profitability is comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC). Futu Holdings' ROIC of 22.14 significantly exceeds its WACC of 9.91, indicating value creation for shareholders.
Conclusion
In conclusion, Futu Holdings (FUTU, Financial) presents signs of being modestly undervalued. Its financial condition is sound, and its profitability is strong. The company's growth ranks impressively high within the Capital Markets industry. For a deeper understanding of Futu Holdings' financials, investors 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.
