Xperi Holding Stock Is Believed To Be Fairly Valued

GuruFocus.com
·4 min read

- By GF Value

The stock of Xperi Holding (NAS:XPER, 30-year Financials) shows every sign of being fairly valued, 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 $21.77 per share and the market cap of $2.3 billion, Xperi Holding stock shows every sign of being fairly valued. GF Value for Xperi Holding is shown in the chart below.


Xperi Holding Stock Is Believed To Be Fairly Valued
Xperi Holding Stock Is Believed To Be Fairly Valued

Because Xperi Holding is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 11.9% over the past three years and is estimated to grow 26.01% annually over the next three to 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. Xperi Holding has a cash-to-debt ratio of 0.28, which which ranks worse than 86% of the companies in Semiconductors industry. The overall financial strength of Xperi Holding is 5 out of 10, which indicates that the financial strength of Xperi Holding is fair. This is the debt and cash of Xperi Holding over the past years:

Xperi Holding Stock Is Believed To Be Fairly Valued
Xperi Holding Stock Is Believed To Be Fairly Valued

Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Xperi Holding has been profitable 4 years over the past 10 years. During the past 12 months, the company had revenues of $892 million and earnings of $1.46 a share. Its operating margin of 22.24% better than 86% of the companies in Semiconductors industry. Overall, GuruFocus ranks Xperi Holding's profitability as fair. This is the revenue and net income of Xperi Holding over the past years:

Xperi Holding Stock Is Believed To Be Fairly Valued
Xperi Holding Stock Is Believed To Be Fairly Valued

Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Xperi Holding is 11.9%, which ranks better than 72% of the companies in Semiconductors industry. The 3-year average EBITDA growth rate is 32%, which ranks better than 78% of the companies in Semiconductors industry.

Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. 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. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Xperi Holding's return on invested capital is 11.63, and its cost of capital is 6.76. The historical ROIC vs WACC comparison of Xperi Holding is shown below:

Xperi Holding Stock Is Believed To Be Fairly Valued
Xperi Holding Stock Is Believed To Be Fairly Valued

In closing, the stock of Xperi Holding (NAS:XPER, 30-year Financials) is estimated to be fairly valued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 78% of the companies in Semiconductors industry. To learn more about Xperi Holding 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.

This article first appeared on GuruFocus.

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