A strong performer from today's afternoon trading session is L3Harris Technologies, whose shares rose 3.5% to $214.54 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
a Lower P/B Ratio Than Its Sector Average but Priced at a Premium:
L3Harris Technologies, Inc. provides mission-critical solutions for government and commercial customers worldwide. 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, L3Harris Technologies has a trailing 12 month P/E ratio of 33.3 and a P/B ratio of 2.17.
L3Harris Technologies's PEG ratio is 1.93, 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.
Increasing Revenues but Narrowing Margins:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $6,182 | $6,801 | $12,856 | $18,194 | $17,062 | $19,419 |
| Operating Margins | 18% | 21% | 12% | 12% | 7% | 7% |
| Net Margins | 11% | 14% | 10% | 6% | 6% | 6% |
| Net Income (M) | $699 | $949 | $1,333 | $1,119 | $1,062 | $1,227 |
| Net Interest Expense (M) | $170 | -$167 | -$204 | -$254 | -$279 | -$543 |
| Depreciation & Amort. (M) | $142 | $143 | $442 | $323 | $171 | $387 |
| Diluted Shares (M) | 120 | 225 | 215 | 203 | 194 | 191 |
| Earnings Per Share | $5.76 | $7.86 | $7.89 | $5.19 | $5.49 | $6.44 |
| EPS Growth | n/a | 36.46% | 0.38% | -34.22% | 5.78% | 17.3% |
| Avg. Price | $140.73 | $171.78 | $176.74 | $204.76 | $230.81 | $214.54 |
| P/E Ratio | 23.93 | 21.39 | 21.98 | 39.15 | 41.66 | 33.16 |
| Free Cash Flow (M) | $615 | $1,024 | n/a | $2,422 | $1,906 | $1,647 |
| CAPEX (M) | $136 | $161 | n/a | $368 | $252 | $449 |
| EV / EBITDA | 15.73 | 27.89 | 22.49 | 19.4 | 39.08 | 28.54 |
| Total Debt (M) | $3,715 | $6,963 | $6,518 | $7,056 | $7,043 | $11,523 |
| Net Debt / EBITDA | 2.67 | 3.75 | 2.68 | 2.46 | 4.75 | 6.05 |
| Current Ratio | 1.27 | 1.49 | 1.37 | 1.4 | 1.17 | 1.01 |
L3Harris Technologies has rapidly growing revenues and increasing reinvestment in the business, positive EPS growth, and positive cash flows. However, the firm suffers from weak operating margins with a negative growth trend and a highly leveraged balance sheet. Finally, we note that L3Harris Technologies has just enough current assets to cover current liabilities, as shown by its current ratio of 1.01.
