SYM

Thinking About Symbotic (SYM)? We Studied It, so You Don't Have To.

Symbotic was one of the market's biggest losers today, losing 4.5% of its value and underperforming both the S&P500 and Dow Industrial composite indices by 0.0%. The small-cap Industrials company ended the day at $37.75, but is still well above its 52 week low of $8.75 and is 10.77% above its average target price of $34.08. Over the last 12 months, Symbotic is up 177.7%, and has outperformed the S&P 500 by 166.0%. The stock has an average analyst rating of buy.

Symbotic does not release its trailing 12 month price to earnings (P/E) ratio because its earnings per share of $-0.28 are negative over the last year. Since P/E ratios are the stock's price divided by its earnings per share, a negative EPS number will result in a negative P/E ratio. This doesn't tell us much besides the fact that the company is not currently profitable.

Based on Symbotic's positive earnings guidance of $0.16, its stock has a forward P/E ratio of 235.9. Earnings refer to the net income of the company from its sales operations, and the P/E ratio tells us how much investors are willing to pay for each dollar of these earnings. In comparison, the Industrials sector has historically had an average P/E ratio of 20.49.

Another metric for valuing 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 value of the company if it sold all its tangible assets and paid off all debts today. Symbotic's P/B ratio of 967.95 indicates that the market may be overvaluing the company when compared to the average P/B ratio of the Industrials sector, which is 3.78.

To understand Symbotic's business, and therefore its attractiveness as a potential investment, we must analyze its margins in two steps. First, we look at its gross margins, which take into account only the direct cost of providing the product or service to the customer. This enables us to determine whether the company benefits from an advantageous market position:

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
  • Average gross margins: -4.9 %
  • Average gross margins growth rate: 16.5 %
  • Coefficient of variability (lower numbers indicate more stability): 378.1 %

Next, we consider the Symbotic's operating margins, which take into account overhead. This tells us whether the company's business model is fundamentally profitable or not:

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
  • Average operating margins: -74.4 %
  • Average operating margins growth rate: 31.2 %
  • Coefficient of variability (lower numbers indicate more stability): 61.5 %

From the above, we can see that Symbotic is not a profitable business. While unprofitable businesses may provide shareholders with attractive short term returns, more conservative investors will prefer to wait until the business can reach a profit before committing.

Our final point of analysis is Symbotic's free cash flow. While earnings and margins are calculated on the basis of a company's delivered goods, they do not actually represent physical payments that flow into the coffers. The actually money that the company has -- minus its capital expenditures -- is reported as its free cash flow, which for Symbotic is as follows:

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
  • Average free cash flow: $-166197000.0
  • Average free cash flow growth rate: -16.7 %
  • Coefficient of variability (lower numbers indicating more stability): 265.6%

Free cash flow represents the money that Symbotic can use to either reinvest in the business or to reward its investors in the form of a dividend. Since the company's most recent cash flows are negative, it comes as no surprise that investors do not get a dividend.

Symbotic does not meet the traditional definition of a fairly valued company. Unless the company has strong qualitative factors in its favor, most value investors will probably prefer to avoid this stock.

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.

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