Tyler Technologies Inc (TYL, Financial) has recorded a daily gain of 11.96% and a 3-month gain of 5.86%. With an Earnings Per Share (EPS) (EPS) of 3.87, the question arises: is the stock modestly undervalued? This article presents a valuation analysis that aims to answer this question. Read on to gain valuable insights into the intrinsic value of Tyler Technologies (TYL).
Company Introduction
Tyler Technologies Inc provides a comprehensive suite of software solutions and services catering to the needs of local government entities, including cities, counties, schools, and courts. Its core products include Munis, the core ERP system, Odyssey, the court management system, and payments. The company also offers a variety of add-on modules and outsourced property tax assessment services. With a stock price of $415.03 and a GF Value of $539.39, Tyler Technologies (TYL, Financial) appears to be modestly undervalued. The following analysis will delve deeper into the company's value, integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is derived based on historical trading multiples, a GuruFocus adjustment factor based on the company's past returns and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
Based on the GF Value, Tyler Technologies (TYL, Financial) appears to be modestly undervalued. The GF Value is an estimate of the fair value at which the stock should be traded. 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. With a current price of $415.03 per share and a market cap of $17.50 billion, Tyler Technologies' future return is expected to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to carefully review a company's financial strength before deciding to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Tyler Technologies has a cash-to-debt ratio of 0.15, which ranks worse than 88.57% of 2738 companies in the Software industry. Based on this, GuruFocus ranks Tyler Technologies's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. Tyler Technologies has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.90 billion and Earnings Per Share (EPS) of $3.87. Its operating margin is 10.96%, which ranks better than 74.3% of 2766 companies in the Software industry. Overall, the profitability of Tyler Technologies is ranked 9 out of 10, which indicates strong profitability.
Growth is one of the most important factors in the valuation of a company. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Tyler Technologies is17.2%, which ranks better than 69.46% of 2397 companies in the Software industry. The 3-year average EBITDA growth is 15.4%, which ranks better than 61.03% of 1994 companies in the Software industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Tyler Technologies's return on invested capital is 4.33, and its cost of capital is 10.04.
Conclusion
In conclusion, the stock of Tyler Technologies (TYL, Financial) gives every indication of being modestly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 61.03% of 1994 companies in the Software industry. To learn more about Tyler Technologies 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.
