Farm & Heavy Construction Machinery company Symbotic is taking Wall Street by surprise today, falling to $52.58 and marking a -6.7% change compared to the S&P 500, which moved -1.0%. SYM is -5.85% below its average analyst target price of $55.85, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, Symbotic shares have outstripped the S&P 500 by 350.3%, with a price change of 373.2%.
Symbotic Inc., an automation technology company, provides robotics and technology to improve efficiency for retailers and wholesalers in the United States. The company is part of the industrials sector, which is considered cyclical. This means that sales revenues, and to some extent share prices, tend to increase during economic booms and then fall back to earth during busts. However, industrial companies can dampen this cyclical effect if they are invovled in multiple industries.
Symbotic does not release its trailing 12 month P/E ratio since its earnings per share of $-0.37 are negative over the last year. But we can calculate it ourselves, which gives us a trailing P/E ratio for SYM of -142.1. Based on the company's positive earnings guidance of $0.6, the stock has a forward P/E ratio of 87.6. 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 first quarter of 2023, the industrials sector has an average P/E ratio of 22.19, and the average for the S&P 500 is 15.97.
To understand the company's long term profitability and market position, we can analyze its operating margins, which are the ratio of its net profits to its revenues. Over the last four years, Symbotic's operating margins have averaged -35.8% and displayed a mean growth rate of 36.8%. These numbers show that the company may not be on the best track.
To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in Symbotic's free cash flow, which was $-175791000 as of its most recent annual report. Free cash flow represents the amount of money available for reinvestment in the business or for payments to equity investors in the form of a dividend. In SYM's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-77137951.0 and they've been growing at an average rate of -38.4%.
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 52580.0 -- in other words, the market value of the company exceeds its book value by a factor of more than 52580, so the company's assets may be overvalued compared to the average P/B ratio of the Industrials sector, which stands at 4.06 as of the first quarter of 2023.
Since it has a negative P/E ratio, an elevated P/B ratio, and negative cash flows with a downwards trend, Symbotic is likely overvalued at today's prices. The company has poor growth indicators because of no PEG ratio and consistently negative margins with a positive growth rate. We hope you enjoyed this overview of SYM's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
