Symbotic Shares Are Climbing Today - Are They Overvalued?

Shares of Symbotic (SYM) jumped 12.7 % during today's morning session, bringing their 52 week performance to 78.0%. The stock seems to be overvalued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's growth prospects andmarket sentiment.

Symbotic Inc., an automation technology company, provides robotics and technology to improve efficiency for retailers and wholesalers in the United States. The small-cap Industrials company is based in Wilmington, United States and has 1,120 full time employees.

SYM Has a Higher P/E Ratio Than the Sector Average

Compared to the Industrials sector's average of 20.49, Symbotic has a trailing twelve month price to earnings (P/E) ratio of -121.9 and an expected P/E ratio of 251.5. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $-0.33 or forward earnings per share of $0.16.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since Symbotic's P/E ratio is higher than its sector average of 20.49, we can deduce that the market is overvaluing the company's earnings.

SYM Has an Alarming P/B Ratio

The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.

Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since Symbotic's P/B ratio of 1031.79 is higher than its sector average of 3.78, such a margin of safety does not exist for the stock.

SYM's Weak Cash Flow Generation Is Troubling

The table below shows that Symbotic is not generating enough cash. A well run company will generally have cash flows that reflect the strength of its underlying business, and in Symbotic's case, free cash flow is growing at an average rate of -16.7% with a coefficient of variability of 265.6%. We can also see that cash flows from operations are evolving at a -17.1% rate, versus 42.7%:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cashflow ($ k) YoY Growth (%)
2022-09-30 -148,247 -17,950 -166,197 -270.64
2021-09-30 109,567 -12,168 97,399 175.28
2020-09-30 -124,307 -5,071 -129,378 -1106.21
2019-09-30 17,185 -4,327 12,858 n/a

Symbotic Is Not a Profitable Business

If you are looking to make SYM a long term investment, its weak margins may give you cause for concern. As you can see from the below, the company is generally losing money on each sale it makes. That being said, stock prices in the short term can be independent of a company's margins, and Symbotic's management may be able to make the business profitable in the future.

Symbotic's Gross Margins

Date Reported Revenue ($ k) Cost of Revenue ($ k) Gross Margins (%) YoY Growth (%)
2022-09-30 593,312 493,665 16.8 304.82
2021-09-30 251,913 241,466 4.15 120.18
2020-09-30 92,086 111,016 -20.56 -3.11
2019-09-30 100,123 120,087 -19.94 n/a

Symbotic's Operating Margins

Date Reported Total Revenue ($ k) Operating Expenses ($ k) Operating Margins (%) YoY Growth (%)
2022-09-30 593,312 240,022 -23.66 51.3
2021-09-30 251,913 132,828 -48.58 59.47
2020-09-30 92,086 91,447 -119.86 -13.44
2019-09-30 100,123 85,829 -105.66 n/a

Symbotic's cost of revenue is growing at a rate of 42.4% in contrast to 29.3% for operating expenses. Sales revenues, on the other hand, have experienced a 56.0% growth rate. As a result, the average gross margins growth is 16.5 and the average operating margins growth rate is 31.2, with coefficients of variability of 378.1% and 61.5% respectively.

We See Mixed Market Signals Regarding SYM

Symbotic has an average rating of buy and target prices ranging from $36.0 to $30.0. At its current price of $40.24, the company is trading 18.08% away from its target price of $34.08. 20.2% of the company's shares are linked to short positions, and 58.1% of the shares are owned by institutional investors.

Date Reported Holder Percentage Shares Value
2023-03-31 Softbank Group Corporation 36% 22,000,000 $885,280,036
2022-12-31 SB Global Advisers Ltd 33% 20,000,000 $804,800,033
2023-03-31 Svf Sponsor III (de) LLC 15% 9,090,000 $365,781,615
2023-03-31 Vanguard Group, Inc. (The) 2% 1,303,936 $52,470,386
2023-03-31 Frontier Capital Management Company LLC 2% 1,041,144 $41,895,636
2023-03-31 Navis Wealth Advisors, LLC 1% 913,554 $36,761,414
2023-03-31 Exchange Traded Concepts LLC 1% 609,414 $24,522,820
2023-03-31 Mirae Asset Global Investments Co., Ltd. 1% 570,229 $22,946,015
2023-03-31 Blackrock Inc. 1% 508,933 $20,479,464
2023-03-31 Legal & General Group PLC 1% 430,713 $17,331,891
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.