Ontrak Stock Is Estimated To Be Possible Value Trap
- By GF Value
The stock of Ontrak (NAS:OTRK, 30-year Financials) is believed to be possible value trap, 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 $29.86 per share and the market cap of $528.2 million, Ontrak stock shows every sign of being possible value trap. GF Value for Ontrak is shown in the chart below.
The reason we think that Ontrak stock might be a value trap is because Ontrak has an Altman Z-score of 1.20, which indicates that the financial condition of the company is in the distressed zone and implies a higher risk of bankruptcy. An Altman Z-score of above 2.99 would be better, indicating safe financial conditions. To learn more about how the Z-score measures the financial risk of the company, please go here.
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. Ontrak has a cash-to-debt ratio of 1.81, which is in the middle range of the companies in the industry of Healthcare Providers & Services. The overall financial strength of Ontrak is 4 out of 10, which indicates that the financial strength of Ontrak is poor. This is the debt and cash of Ontrak over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Ontrak has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $82.8 million and loss of $1.45 a share. Its operating margin is -18.01%, which ranks worse than 79% of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of Ontrak is ranked 3 out of 10, which indicates poor profitability. This is the revenue and net income of Ontrak over the past years: