Agilysys Inc (AGYS, Financial) recently saw a significant daily gain of 14.9%, with a 3-month gain of 2.78%. Currently, its Earnings Per Share (EPS) stands at 3.16. In this analysis, we explore whether Agilysys, with a current stock price of $92.16, is modestly overvalued as suggested by its GF Value of $78.75.
Company Introduction
Agilysys Inc is a leading developer of industry-specific technology solutions, enhancing operational control for various sectors through products in property management, point-of-sale, and more. The company primarily serves markets like gaming, hotels, and healthcare, with most revenues stemming from contract support and subscription services. Given its current market cap of $2.50 billion and a stock price significantly higher than the GF Value, a deeper valuation analysis is warranted.
Understanding GF Value
The GF Value is a proprietary measure reflecting the true value of a stock, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Agilysys, the GF Value suggests a fair value at $78.75, indicating that the stock might be modestly overvalued at its current price of $92.16. This assessment aligns with the stock's potential for lower future returns compared to its business growth.
Financial Strength
Investing in a company with robust financial health is crucial. Agilysys boasts a strong financial strength rating of 8 out of 10, with a cash-to-debt ratio of 4.81. This positions it better than 58.96% of its peers in the software industry, indicating a lower risk of financial distress.
Profitability and Growth
Despite its strong financial position, Agilysys's profitability is considered poor, with an operating margin of 6.99%, which is nonetheless better than 61.54% of its industry counterparts. The company's growth metrics, however, reflect a challenging environment, with a 3-year average revenue growth rate of 3.4%, ranking below 64.03% of the industry.
ROIC vs. WACC
An effective way to gauge value creation is by comparing the Return on Invested Capital (ROIC) against the Weighted Average Cost of Capital (WACC). Agilysys's ROIC stands impressively at 41.84, vastly exceeding its WACC of 3.61, which signals efficient management and strong potential for investor returns.
Conclusion
While Agilysys (AGYS, Financial) appears modestly overvalued based on its GF Value, the company's strong financial health and exceptional ROIC relative to its WACC suggest underlying strengths. Investors should weigh these factors carefully against the stock's current premium pricing. For further insights into Agilysys's financials, consider exploring 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.
