Investors constantly seek clarity on whether a stock is priced appropriately relative to its intrinsic value. For Futu Holdings Ltd (FUTU, Financial), with a daily gain of 4.23% and a 3-month loss of -6.54%, the question of valuation is particularly pertinent. The company boasts an Earnings Per Share (EPS) of 3.98. Is Futu Holdings modestly undervalued as the metrics suggest? The following analysis aims to shed light on this valuation query.
Company Introduction
Futu Holdings Ltd (FUTU, Financial) operates as an innovative online broker, providing comprehensive investing services through its digital platform, Futu NiuNiu. This platform offers users market data, trading services, and news feeds across equity markets in Hong Kong, Mainland China, Singapore, and the United States. With a current stock price of $54.17 and a Fair Value (GF Value) estimated at $72.6, an analysis of the company's financials and market position is essential to understanding its potential undervaluation.
Summarize GF Value
The GF Value is a proprietary metric that represents the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance and growth, and future business performance forecasts. For Futu Holdings (FUTU, Financial), the GF Value suggests that the stock is modestly undervalued. This implies that the long-term return on Futu Holdings' stock could potentially surpass its business growth, presenting an attractive opportunity for investors.
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Financial Strength
Understanding a company's financial strength is crucial to avoid the risk of permanent capital loss. Futu Holdings' cash-to-debt ratio of 1.56 places it in the middle of the pack within the Capital Markets industry. The company's overall financial strength is rated as fair, with a score of 6 out of 10, suggesting a stable financial footing.
Profitability and Growth
Profitability is a less risky attribute for investors, and Futu Holdings has demonstrated consistent profitability with an impressive operating margin of 51.47%, outperforming the majority of its industry peers. Furthermore, the company's growth metrics are equally robust, with a 3-year average annual revenue growth of 79%, signaling strong value creation potential for shareholders.
ROIC vs. WACC
An effective measure of a company's profitability is the comparison between its Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). Futu Holdings' ROIC of 22.14 is more than double its WACC of 9.81, indicating the company's adeptness at generating cash flow relative to its invested capital.
Conclusion
In conclusion, Futu Holdings (FUTU, Financial) appears to be modestly undervalued, with solid financial health and strong profitability. Its growth outpaces most competitors in the Capital Markets industry, marking it as a potentially lucrative investment. For a more detailed financial overview, investors can delve into Futu Holdings' 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.
