With a daily gain of 2.97% and a 3-month gain of 12.02%, TD Synnex Corp (SNX, Financial) has shown a notable performance in the market. Investors are keenly looking at its Earnings Per Share (EPS) of 6.89 to determine its financial health. The critical question on their minds: is TD Synnex fairly valued at its current price? This article delves into the valuation analysis of TD Synnex, providing insights into whether its stock price reflects its true market value.
Company Introduction
TD Synnex Corp is a significant player in the IT ecosystem, specializing in the distribution and aggregation of IT hardware, software, and systems. With a presence across the Americas, Europe, and APJ, the company's offerings span from computing devices and peripherals to advanced server and datacenter infrastructure. Comparing TD Synnex's current stock price of $115.02 to the GuruFocus Fair Value (GF Value) of $105.42 reveals a close alignment, suggesting a fairly valued status. This comparison sets the stage for a deeper evaluation of the company's intrinsic value.
Summarize GF Value
The GF Value is a unique calculation that determines the intrinsic value of a stock by considering historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. TD Synnex's current GF Value indicates that the stock is fairly valued. This assessment is based on historical trading patterns, the company's past growth, and expected future performance. The implication for investors is that the long-term return of TD Synnex's stock should align closely with the rate of its business growth, barring significant market fluctuations.
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Financial Strength
Investing in companies with robust financial strength is crucial to minimize the risk of capital loss. TD Synnex's financial strength is fair, with a cash-to-debt ratio of 0.26, placing it in a challenging position compared to its industry peers. This metric, alongside the company's interest coverage, provides a snapshot of its financial resilience.
Profitability and Growth
TD Synnex's track record of profitability over the past decade underpins its investment appeal. With a revenue of $56.40 billion and an Earnings Per Share (EPS) of $6.89, the company's operating margin stands at 2.25%. Although this ranks below some competitors, TD Synnex's overall profitability is commendable. Additionally, the company's revenue growth rate surpasses many within the industry, highlighting its potential for value creation.
ROIC vs WACC
An effective way to gauge profitability is by comparing Return on Invested Capital (ROIC) with Weighted Average Cost of Capital (WACC). TD Synnex's ROIC of 7.85% against its WACC of 9.93% suggests challenges in generating cash flow relative to its invested capital. This comparison is crucial for understanding the company's ability to create shareholder value.
Conclusion
TD Synnex (SNX, Financial) is currently fairly valued, with a balanced financial condition and reasonable profitability. However, its growth prospects and value creation potential warrant careful consideration, as they lag behind a significant portion of the industry. For a more detailed financial analysis, investors are encouraged to review TD Synnex's 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.
