- By GF Value
The stock of Abiomed (NAS:ABMD, 30-year Financials) is believed to be modestly undervalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $262.71 per share and the market cap of $11.9 billion, Abiomed stock gives every indication of being modestly undervalued. GF Value for Abiomed is shown in the chart below.
Because Abiomed is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 22.6% over the past five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Abiomed has a cash-to-debt ratio of 10000.00, which ranks better than 100% of the companies in the industry of Medical Devices & Instruments. Based on this, GuruFocus ranks Abiomed's financial strength as 10 out of 10, suggesting strong balance sheet. This is the debt and cash of Abiomed over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Abiomed has been profitable 9 years over the past 10 years. During the past 12 months, the company had revenues of $847.5 million and earnings of $4.93 a share. Its operating margin of 27.09% better than 87% of the companies in the industry of Medical Devices & Instruments. Overall, GuruFocus ranks Abiomed's profitability as strong. This is the revenue and net income of Abiomed over the past years: