A strong performer from today's afternoon trading session is Keysight Technologies, whose shares rose 2.7% to $127.07 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.
Forward Earnings Expected to Increase but Priced at a Premium:
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 25.19 and an average price to book (P/B) ratio of 3.17. In contrast, Keysight Technologies has a trailing 12 month P/E ratio of 27.7 and a P/B ratio of 4.52.
When we divide Keysight Technologies's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -6.13. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Growing Revenues and Healthy Leverage Levels:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,878 | $4,303 | $4,221 | $4,941 | $5,420 | $5,464 |
| Operating Margins | -10% | 17% | 18% | 22% | 25% | 25% |
| Net Margins | 4% | 14% | 15% | 18% | 21% | 19% |
| 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 | $127.16 |
| P/E Ratio | 64.16 | 27.05 | 30.36 | 33.21 | 24.7 | 21.37 |
| 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 | 15.01 |
| 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 growing revenues and increasing reinvestment in the business, strong operating margins with a positive growth rate, and exceptional EPS growth. The company also benefits from generally positive cash flows, an excellent current ratio of 2.35, and healthy leverage levels.
