As of the latest trading session, Illumina Inc (ILMN, Financial) has seen a daily gain of 3.85%, yet it faces a three-month loss of -15.16%. With a concerning Loss Per Share of 8.15, investors and market watchers may wonder if the stock is significantly undervalued. This article delves into Illumina's current market valuation and provides a detailed analysis to answer just that.
Company Overview
Illumina Inc (ILMN, Financial), a pioneer in genetic analysis, is integral to the life science and clinical lab sectors, with over 90% of its revenue stemming from its sequencing instruments, consumables, and services. The company's technology supports comprehensive genome sequencing in humans and other large organisms, while its lower throughput tools cater to smaller data output needs, such as viral and cancer tumor screening. Additionally, Illumina markets microarrays, which accounted for 9% of its 2023 sales, facilitating lower-cost genetic screening primarily in consumer and agricultural applications. Currently, Illumina's stock is trading at $117.11, significantly lower than its GF Value of $202.96, suggesting potential undervaluation.
Understanding GF Value
The GF Value is a proprietary measure calculated to represent the intrinsic value of a stock. It integrates historical trading multiples, a GuruFocus adjustment factor based on past performance, and estimates of future business performance. According to this metric, Illumina is significantly undervalued. This valuation suggests that the long-term return on Illumina's stock could substantially exceed its business growth, presenting a potentially attractive opportunity for investors.
Financial Strength and Risks
Assessing a company's financial strength is crucial before investment. Illumina's cash-to-debt ratio stands at 0.49, which is lower than 67.1% of its peers in the Medical Diagnostics & Research industry. This metric, along with a fair overall financial strength rating of 6 out of 10, suggests that Illumina holds a moderate risk of financial distress.
Profitability and Growth Prospects
Illumina has shown strong profitability, with significant revenue of $4.50 billion over the past twelve months. However, its operating margin of -6.08% ranks below 51.12% of industry counterparts. The company's growth metrics are also concerning, with a 3-year average revenue growth rate better than only 57.43% of its industry peers. These figures highlight potential areas for improvement and caution for investors.
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides additional insights into profitability. Illumina's ROIC of -3.48 versus a WACC of 12.26 suggests it may not be creating shareholder value in the current period.
Conclusion
Despite its current undervaluation according to GF Value, Illumina's financial health and profitability raise important considerations. Potential investors should weigh these factors carefully against the possible long-term gains suggested by the stock's current market price. For a deeper exploration of Illumina's financials, consider reviewing their 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.
