The stock of Atomera (NAS:ATOM, 30-year Financials) is estimated 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 $20.79 per share and the market cap of $478.9 million, Atomera stock is believed to be modestly overvalued. GF Value for Atomera is shown in the chart below.
Because Atomera is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company’s financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Atomera has a cash-to-debt ratio of 33.92, which which ranks better than 83% of the companies in Semiconductors industry. The overall financial strength of Atomera is 6 out of 10, which indicates that the financial strength of Atomera is fair. This is the debt and cash of Atomera 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. Atomera has been profitable 0 years over the past 10 years. During the past 12 months, the company had revenues of $0.4 million and loss of $0.75 a share. Its operating margin of -3711.25% in the bottom 10% of the companies in Semiconductors industry. Overall, GuruFocus ranks Atomera’s profitability as poor. This is the revenue and net income of Atomera 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 Atomera is -30.7%, which ranks in the bottom 10% of the companies in Semiconductors industry. The 3-year average EBITDA growth rate is 11.1%, which ranks in the middle range of the companies in Semiconductors industry.
One can also evaluate a company’s profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Atomera’s ROIC is -1217.90 while its WACC came in at 10.54. The historical ROIC vs WACC comparison of Atomera is shown below:
In short, the stock of Atomera (NAS:ATOM, 30-year Financials) appears to be modestly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the middle range of the companies in Semiconductors industry. To learn more about Atomera stock, you can check out its 30-year Financials here.
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