With a daily gain of 5.71%, a three-month gain of 15.36%, and an Earnings Per Share (EPS) of 4.66, Broadridge Financial Solutions Inc (BR, Financial) presents an intriguing investment prospect. This article aims to answer a crucial question: Is Broadridge Financial Solutions fairly valued? Let's delve into the valuation analysis to find out.
Company Introduction
Broadridge Financial Solutions Inc (BR, Financial), a spinoff from ADP in 2007, is a leading provider of investor communications and technology-driven solutions to banks, broker/dealers, asset managers, wealth managers, and corporate issuers. The company operates two segments: investor communication solutions and global technology and operations. With a stock price of $175.64 and a GF Value of $182.57, Broadridge Financial Solutions seems to be trading close to its fair value. This comparison sets the stage for a detailed exploration of the company's value.
Understanding GF Value
The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is derived through a unique methodology that considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, its future return will likely be higher.
At its current price of $175.64 per share, Broadridge Financial Solutions has a market cap of $20.70 billion. The stock is estimated to be fairly valued, implying that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
It is crucial to assess the financial strength of a company before investing. Investing in companies with poor financial strength carries a higher risk of permanent loss. Broadridge Financial Solutions has a cash-to-debt ratio of 0.08, which is worse than 93.81% of companies in the Software industry. The overall financial strength of Broadridge Financial Solutions is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Broadridge Financial Solutions has been profitable for 10 years. Over the past twelve months, the company had a revenue of $5.90 billion and Earnings Per Share (EPS) of $4.66. Its operating margin is 13.86%, which ranks better than 80.76% of companies in the Software industry. Overall, the profitability of Broadridge Financial Solutions is ranked 9 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation 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 Broadridge Financial Solutions is 9.5%, which ranks better than 53.75% of companies in the Software industry. The 3-year average EBITDA growth rate is 9.9%, which ranks better than 50.43% of companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) is another way to assess its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Broadridge Financial Solutions's ROIC is 8.76, and its cost of capital is 8.7.
Conclusion
In conclusion, the stock of Broadridge Financial Solutions is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 50.43% of companies in the Software industry. To learn more about Broadridge Financial Solutions stock, you can check out its 30-Year Financials here.
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