Standing out among the Street's worst performers today is Symbotic, a farm & heavy construction machinery company whose shares slumped -3.0% to a price of $51.62, 7.57% below its average analyst target price of $55.85.
The average analyst rating for the stock is buy. SYM underperformed the S&P 500 index by -3.0% during today's afternoon session, but outpaced it by 321.0% over the last year with a return of 345.6%.
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 -139.5. Based on the company's positive earnings guidance of $0.6, the stock has a forward P/E ratio of 86.0. As of the first quarter of 2023, the average Price to Earnings (P/E) ratio for US industrials companies is 22.19, and the S&P 500 has an average of 15.97. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
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.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Symbotic was $-175791000 as of its last 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 51620.0 -- in other words, the market value of the company exceeds its book value by a factor of more than 51620, 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.
Symbotic is likely overvalued at today's prices because it has a negative P/E ratio, an elevated P/B ratio, and negative cash flows with a downwards trend. The stock has poor growth indicators because of its consistently negative margins with a positive growth rate, and no 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.