It hasn't been a great afternoon session for Keysight Technologies investors, who have watched their shares sink by -2.3% to a price of $156.42. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Keysight Technologies's Valuation Is in Line With Its Sector Averages:
Keysight Technologies, Inc. provides electronic design and test solutions to commercial communications, networking, aerospace, defense and government, automotive, energy, semiconductor, electronic, and education industries in the Americas, Europe, and the Asia Pacific. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, Keysight Technologies has a trailing 12 month P/E ratio of 28.8 and a P/B ratio of 5.67.
Keysight Technologies's PEG ratio is 5.93, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Exceptional EPS Growth and Healthy Leverage Levels:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,878 | $4,303 | $4,221 | $4,941 | $5,420 | $4,083 |
| Operating Margins | -10% | 17% | 18% | 22% | 25% | 33% |
| Net Margins | 4% | 14% | 15% | 18% | 21% | 26% |
| Net Income (M) | $165 | $621 | $627 | $894 | $1,124 | $1,057 |
| Net Interest Expense (M) | $83 | $80 | $78 | $79 | $79 | $78 |
| Depreciation & Amort. (M) | $103 | $96 | $104 | $117 | $117 | $120 |
| Diluted Shares (M) | 191 | 191 | 189 | 187 | 182 | 179 |
| Earnings Per Share | $0.86 | $3.25 | $3.31 | $4.78 | $6.18 | $5.91 |
| EPS Growth | n/a | 277.91% | 1.85% | 44.41% | 29.29% | -4.37% |
| Avg. Price | $56.46 | $89.53 | $101.69 | $160.74 | $153.85 | $155.8 |
| P/E Ratio | 64.16 | 27.05 | 30.36 | 33.21 | 24.7 | 26.18 |
| Free Cash Flow (M) | $423 | $878 | $899 | $1,148 | $959 | $1,212 |
| CAPEX (M) | $132 | $120 | $117 | $174 | $185 | $196 |
| EV / EBITDA | -39.42 | 21.14 | 21.81 | 24.36 | 18.79 | 18.4 |
| Total Debt (M) | $1,790 | $1,788 | $1,789 | $1,791 | $1,793 | $2,393 |
| Net Debt / EBITDA | -3.01 | 0.24 | 0.04 | -0.22 | -0.17 | -0.05 |
| Current Ratio | 1.63 | 3.21 | 3.12 | 2.93 | 3.01 | 2.35 |
Keysight Technologies has strong operating margins with a positive growth rate, exceptional EPS growth, and generally positive cash flows. The company also benefits from an excellent current ratio of 2.35, weak revenue growth and increasing reinvestment in the business, and healthy leverage levels.
