Alcidion Group Stock Shows Every Sign Of Being Significantly Overvalued
- By GF Value
The stock of Alcidion Group (ASX:ALC, 30-year Financials) gives every indication of being significantly overvalued, 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 AUD 0.37 per share and the market cap of AUD 366.6 million, Alcidion Group stock is estimated to be significantly overvalued. GF Value for Alcidion Group is shown in the chart below.
Because Alcidion Group is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 71% over the past three years and is estimated to grow 24.43% annually over the next three to five years.
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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. Alcidion Group has a cash-to-debt ratio of 39.19, which which ranks better than 87% of the companies in the industry of Healthcare Providers & Services. The overall financial strength of Alcidion Group is 8 out of 10, which indicates that the financial strength of Alcidion Group is strong. This is the debt and cash of Alcidion Group over the past years:
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. Alcidion Group has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of AUD 21.5 million and loss of AUD 0.003 a share. Its operating margin is -15.98%, which ranks worse than 77% of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of Alcidion Group is ranked 1 out of 10, which indicates poor profitability. This is the revenue and net income of Alcidion Group over the past years:
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. Alcidion Group's 3-year average revenue growth rate is better than 96% of the companies in the industry of Healthcare Providers & Services. Alcidion Group's 3-year average EBITDA growth rate is 7.2%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services.
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, Alcidion Group's ROIC is -10.87 while its WACC came in at 10.49. The historical ROIC vs WACC comparison of Alcidion Group is shown below:
In short, Alcidion Group (ASX:ALC, 30-year Financials) stock is believed to be significantly overvalued. The company's financial condition is strong and its profitability is poor. Its growth ranks in the middle range of the companies in the industry of Healthcare Providers & Services. To learn more about Alcidion Group stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.
