– With GF Value
Zscaler stock (NAS: ZS, 30-year Financials) appears to be highly valued, according to GuruFocus Value calculations. The GuruFocus value is a GuruFocus estimate of the fair value at which the stock should be traded. It is calculated based on the historical volumes on which the stock has traded, past business growth and analysts’ estimates of future business performance. If a stock price is well above the GF Value Line, it is valued and the future yield is likely to be poor. On the other hand, if it is significantly lower than the GF Value Line, the future return is likely to be higher. At its current price of $ 169.78 per share and the market cap of $ 23.1 billion, Zscaler stock is estimated to be highly valued. The GF Value for Zscaler is shown in the chart below.
With Zscaler being highly valued, the stock is likely to return in the long run much lower than future business growth, which has averaged 40.1% over the past three years. and is estimated to grow 35.63% annually over the next three to five years. .
Link: These companies may deliver higher yields in the future with less risk.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must conduct their research and review the financial strength of a company before deciding to buy shares. Both the cash-to-debt ratio and the interest coverage of a company are a great way to understand its financial strength. Zscaler has a cash-to-debt ratio of 1.54, which is in the middle of the range of companies in the software industry. The overall financial strength of Zscaler is 4 out of 10, which indicates that Zscaler’s financial strength is poor. Zscaler’s debt and cash over the past few years is as follows:
It is less risky to invest in for-profit companies, especially those with a long-term steady profit. A company with high profit margins is usually a safer investment than those with low profit margins. Zscaler has been profitable 0 over the last 10 years. Over the past twelve months, the company had revenue of $ 536 million and a share loss of $ 1.44. Its operating margin is -30.22%, which is worse than 79% of the companies in software industry. Overall, Zscaler’s profit is at level 3 out of 10, which represents a poor profit. Zscaler’s net income and proceeds over the past few years are:
Growth is perhaps the most important factor in valuing a company. GuruFocus research has found that growth and long-term performance of a company’s stock are closely linked. The faster a company grows, the more likely it is to create value for shareholders, especially if the growth is profitable. The average 3-year annual revenue growth rate of Zscaler is 40.1%, which is better than 92% of the companies in software industry. EBITDA’s average 3-year growth rate is -35.1%, which is in the bottom 10% of companies in the software industry.
Another way to look at a company’s profit is to compare its return on investment capital with the cost of weight capital. Return on investment capital (ROIC) measures how well a company generates cash flow relative to the capital they have invested in its business. The average weighted capital cost (WACC) is the rate that a company is expected to pay on average to its security owners to finance its assets. We want the return on investment capital to be higher than the cost of weight capital. For the past 12 months, Zscaler’s return on investment capital has been -27.13, and its capital cost is 6.78. The historical ROIC vs WACC comparison of Zscaler is shown below:
Overall, Zscaler stock (NAS: ZS, 30-year Financials) is considered to be highly valued. The financial position of the company is poor and its profit is poor. Its growth is in the bottom 10% of companies in the software industry. To learn more about Zscaler stock, you can check out its 30-year Finances here. To find out the top quality companies that can deliver above average results, check out GuruFocus High Quality Low Capex Screener. This article originally appeared on GuruFocus.