- By GF Value
The stock of DLH Holdings (NAS:DLHC, 30-year Financials) appears to be modestly overvalued, 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 $10.64 per share and the market cap of $133.5 million, DLH Holdings stock gives every indication of being modestly overvalued. GF Value for DLH Holdings is shown in the chart below.
Because DLH Holdings is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 19.5% over the past three years and is estimated to grow 14.58% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. DLH Holdings has a cash-to-debt ratio of 0.00, which is in the bottom 10% of the companies in Business Services industry. The overall financial strength of DLH Holdings is 4 out of 10, which indicates that the financial strength of DLH Holdings is poor. This is the debt and cash of DLH Holdings 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. DLH Holdings has been profitable 7 years over the past 10 years. During the past 12 months, the company had revenues of $214.8 million and earnings of $0.55 a share. Its operating margin of 6.94% in the middle range of the companies in Business Services industry. Overall, GuruFocus ranks DLH Holdings's profitability as fair. This is the revenue and net income of DLH Holdings over the past years: