Shares of SYM Are Down -8.9% - Are They Valued Fairly?

Standing out among the Street's worst performers today is Symbotic, a diversified financial company whose shares slumped -8.9% to a price of $11.74, 43.61% below its average analyst target price of $20.82. The average analyst rating for the stock is buy. SYM underperformed the S&P 500 index by -7.1% as of today's aftermarket session, but outpaced it by 43.7% over the last year with a return of 31.4%.

Symbotic is part of the financial services sector, alongside a staggering variety of banking, mortgage, insurance,and credit service companies. If there is one common denominator among all companies in the sector, it’s that they are all dedicated to maintaining and developing new systems for the storage and transfer of value and risk.

If this sounds impossibly abstract, it’s because it is. That’s why the financial services sector is often misunderstood by market participants, including the most sophisticated investors and even financial regulators themselves. The crisis of 2008 illustrates how bad these miscalculations can end -- but it should not blind investors to the real value and opportunities being created everyday within this sector.

The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the third quarter of 2022, the financial services sector has an average P/E ratio of 13.34, and the average for the S&P 500 is 15.97.

Symbotic does not publish either its forward or trailing P/E ratios because their values are negative -- meaning that each share of stock represents a net earnings loss. But we can calculate these P/E ratios anyways using the stocks forward and trailing (Eps) values of $-0.01 and $-23.79. We can see that SYM has a forward P/E ratio of -1174.0 and a trailing P/E ratio of -0.5.

In contrast with earnings, gross profits are calculated on the basis of the company's cost of goods sold (i.e. cost of labor and materials only) subtracted from sales revenues. Significant gross profit margins shed light on how much freedom the company has in setting the prices of its products. A wider gross profit margin indicates that a company may have a competitive advantage, as it is free to keep its product prices high relative to their cost. In SYM's case, the gross profit margins are 16.1%, which that it is operating in a highly competitive market, where it is unable to raise its prices (and thus increase its margins) without losing customers to its competitors.

Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Symbotic's P/B ratio is 85.1 -- in other words, the market value of the company exceeds its book value by a factor of more than 85, so the company's assets may be overvalued compared to the average P/B ratio of the Financial Services sector, which stands at 1.95 as of the second quarter of 2022.

As of third quarter of 2022, Symbotic is likely overvalued because it has a negative P/E ratio, an elevated P/B ratio, and no published cash flows. The stock has poor growth indicators because of its low profit margins, and no published PEG ratio. We hope this preliminary analysis will encourage you to do your own research into SYM's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.