- By GF Value
The stock of Ultralife (NAS:ULBI, 30-year Financials) appears 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 $8.57 per share and the market cap of $136.8 million, Ultralife stock appears to be modestly undervalued. GF Value for Ultralife is shown in the chart below.
Because Ultralife is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth, which averaged 7.5% 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. Ultralife has a cash-to-debt ratio of 7.76, which ranks better than 76% of the companies in Industrial Products industry. Based on this, GuruFocus ranks Ultralife's financial strength as 8 out of 10, suggesting strong balance sheet. This is the debt and cash of Ultralife over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Ultralife has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $107.7 million and earnings of $0.33 a share. Its operating margin is 5.29%, which ranks in the middle range of the companies in Industrial Products industry. Overall, the profitability of Ultralife is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Ultralife over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Ultralife is 7.5%, which ranks in the middle range of the companies in Industrial Products industry. The 3-year average EBITDA growth rate is 4.8%, which ranks in the middle range of the companies in Industrial Products industry.