With a daily gain of 2.98%, a 3-month gain of 9.6%, and an Earnings Per Share (EPS) (EPS) of 8.67, Equinix Inc (EQIX, Financial) appears to be performing well in the stock market. But the question remains: is the stock fairly valued? In this article, we will delve into a comprehensive valuation analysis of Equinix (EQIX) to answer this question. So, let's get started!
About Equinix Inc (EQIX, Financial)
Equinix operates 248 data centers in 71 markets worldwide, generating 46% of its total revenue in the Americas, 32% in Europe, the Middle East, and Africa, and 22% in Asia-Pacific. With over 10,000 customers dispersed across five verticals, Equinix has a market cap of $73.30 billion and sales of $7.70 billion. The company's stock price stands at $782.88, close to its GF Value of $774.43, suggesting that it might be fairly valued.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides a visual representation of the stock's fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued, and if it is significantly below, it is undervalued.
According to GuruFocus Value calculation, Equinix (EQIX, Financial) appears to be fairly valued. This implies that the long-term return of Equinix stock is likely to be close to the rate of its business growth.
Equinix's Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before investing. Equinix, with a cash-to-debt ratio of 0.14, ranks better than 71.17% of 718 companies in the REITs industry. Its overall financial strength is 5 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. Equinix has been profitable 9 out of the past 10 years, with an operating margin of 17.51%, which ranks worse than 83.63% of 666 companies in the REITs industry. However, the company's profitability rank is 9 out of 10, indicating strong profitability.
One of the critical factors in a company's valuation is its growth . Equinix's average annual revenue growth is 6.4%, ranking better than 74.41% of 633 companies in the REITs industry. Its 3-year average EBITDA growth is 3.1%, ranking better than 55.39% of 538 companies in the REITs industry.
Return on Invested Capital vs. Weighted Cost of Capital
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insights into its profitability. For the past 12 months, Equinix's ROIC is 4.08, and its WACC is 7.96.
Conclusion
In summary, Equinix (EQIX, Financial) appears to be fairly valued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 55.39% of 538 companies in the REITs industry. To learn more about Equinix stock, you can check out its 30-Year Financials here.
To find high-quality companies that might deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
