Elbit Systems Ltd (ESLT, Financial) experienced a daily loss of 6.97% and a 3-month loss of 4.09% with an Earnings Per Share (EPS) (EPS) of 5.97. Is the stock significantly overvalued? This article embarks on a detailed valuation analysis of Elbit Systems. Please continue reading to understand the intrinsic value of Elbit Systems and its future prospects.
Company Overview
Elbit Systems Ltd is a renowned technology company that specializes in creating a plethora of systems and products for aircraft, land, and naval applications. These products are widely used for defense, homeland security, and commercial flight capabilities. Elbit Systems' products can be installed on new platforms or can be used to modernize existing platforms. The company also provides maintenance instructions and support team specialists to its customers. Elbit Systems operates globally, marketing its systems and products as a prime contractor or as a subcontractor to government, defense, and homeland security contractors.
As of October 16, 2023, Elbit Systems' stock price stands at $197.09, while the estimated fair value according to the GF Value is $143.25, suggesting a potential overvaluation. The company has a market cap of $8.80 billion and sales of $5.70 billion.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. 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 it is significantly below the GF Value Line, its future return will likely be higher.
Elbit Systems (ESLT, Financial) appears to be significantly overvalued based on the GuruFocus Value calculation, suggesting that the long-term return of its stock is likely to be much lower than its future business growth.
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Elbit Systems' Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, investors must thoroughly research and review a company's financial strength before purchasing shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Elbit Systems has a cash-to-debt ratio of 0.09, ranking worse than 85.67% of 293 companies in the Aerospace & Defense industry. The overall financial strength of Elbit Systems 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. Elbit Systems has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $5.70 billion and an EPS of $5.97. Its operating margin is 6.83%, ranking better than 52.2% of 295 companies in the Aerospace & Defense industry. Overall, the profitability of Elbit Systems is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Elbit Systems is 6.3%, ranking better than 63.26% of 264 companies in the Aerospace & Defense industry. The 3-year average EBITDA growth rate is 5.6%, ranking better than 61.74% of 230 companies in the Aerospace & Defense industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Elbit Systems' ROIC was 5.15, while its WACC came in at 8.94.
Conclusion
In conclusion, Elbit Systems' stock appears to be significantly overvalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 61.74% of 230 companies in the Aerospace & Defense industry. To learn more about Elbit Systems stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
