Gartner Inc (IT, Financial) saw a daily gain of 18.17% and a 3-month gain of 15.3%. With an Earnings Per Share (EPS) of 11.54, the question arises: is the stock fairly valued? This article provides a valuation analysis to answer this question and invites readers to delve into the comprehensive analysis that follows.
Company Introduction
Based in Stamford, Conn., Gartner Inc (IT, Financial) provides independent research and analysis on information technology and other related technology industries. Its research is delivered to clients in the form of reports, briefings, and updates. Gartner also provides consulting services and hosts IT conferences globally. The company's stock price and the GF Value, an estimation of fair value, will be compared in the following sections to provide a deeper understanding of Gartner's value.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on three factors: historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. This value line provides an overview of the fair value that the stock should be traded at.
The stock of Gartner (IT, Financial) is estimated to be fairly valued based on GuruFocus' valuation method. The GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $398.94 per share, Gartner stock is estimated to be fairly valued.
Because Gartner is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of Gartner
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Gartner has a cash-to-debt ratio of 0.39, which ranks worse than 79.02% of 2741 companies in the Software industry. Based on this, GuruFocus ranks Gartner's financial strength as 6 out of 10, suggesting fair balance sheet.
Profitability and Growth of Gartner
Companies that have been consistently profitable over the long term offer less risk for investors. Gartner has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $5.70 billion and Earnings Per Share (EPS) of $11.54. Its operating margin is 19.99%, which ranks better than 88.84% of 2768 companies in the Software industry. Overall, the profitability of Gartner is ranked 9 out of 10, which indicates strong profitability.
Growth is probably one of the most important factors in the valuation of a company. Gartner's 3-year average revenue growth rate is better than 61.23% of 2396 companies in the Software industry. Gartner's 3-year average EBITDA growth rate is 36.8%, which ranks better than 82.49% of 1993 companies in the Software industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Gartner's ROIC was 12.86, while its WACC came in at 10.4.
Conclusion
Overall, Gartner (IT, Financial) stock is estimated to be fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 82.49% of 1993 companies in the Software industry. To learn more about Gartner 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.
