Vicor Corporation (NASDAQ: VICR), an industrials business with a market capitalization of $2.0 billion, saw its share price increase by 30.8% over the last month. As a mid-cap stock, hardly covered by analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. However, could shares still be trading at a relatively cheap price? Let’s take a look at Vicor’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What Is Vicor Worth?
Vicor appears to be overvalued by -83.3% at the moment, based on 8 separate valuation models. The stock is currently trading at $49.10 on the market compared to our average intrinsic value of $8.19. This means that the opportunity to buy Vicor at a good price has disappeared.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$10.97||-77.7%|
|5-yr DCF Revenue Exit||$16.54||-66.3%|
|Peer Revenue Multiples||$22.83||-53.5%|
|10-yr DCF EBITDA Exit||$1.52||-96.9%|
|5-yr DCF EBITDA Exit||$2.45||-95.0%|
|Peer EBITDA Multiples||$4.32||-91.2%|
|Peer P/E Multiples||$1.59||-96.8%|
|Earnings Power Value||$5.33||-89.1%|
Click on any of the analyses above to view the latest model with real-time data.
Furthermore, Vicor’s share price also seems relatively stable compared to the rest of the market as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon. And once it’s there, it may be hard to fall back down into an attractive buying range.
How Much Growth Will Vicor Generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.
source: finbox.io data explorer
With Vicor’s relatively muted top-line growth of 3.4% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
Unfortunately for shareholders, Vicor’s future growth is relatively low and it appears the stock is now trading above its intrinsic value. Therefore, it may be a good time to begin reducing your position in the company. However, there are also other factors to consider that could explain the current overvaluation.
However, if you have not done so already, I highly recommend you complete your research on Vicor by taking a look at the following:
Efficiency Metrics: how much free cash flow does Vicor generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm’s free cash flow margin here.
Risk Metrics: what is Vicor’s Altman Z score? It’s a famous formula used to predict the probability that a firm will go into bankruptcy within two years. View the company’s Altman Z score here.
Valuation Metrics: how much upside do shares of Vicor have based on the Ben Graham Formula? Take a look at our Ben Graham Formula data explorer which also compares the company’s upside to its peers.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.