The stock of Rubicon Technology (NAS:RBCN, 30-year Financials) shows every sign of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $10.1027 per share and the market cap of $24.7 million, Rubicon Technology stock shows every sign of being fairly valued. GF Value for Rubicon Technology is shown in the chart below.
Because Rubicon Technology is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Rubicon Technology has a cash-to-debt ratio of 10000.00, which is better than 100% of the companies in Semiconductors industry. GuruFocus ranks the overall financial strength of Rubicon Technology at 8 out of 10, which indicates that the financial strength of Rubicon Technology is strong. This is the debt and cash of Rubicon Technology over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Rubicon Technology has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $4 million and earnings of $0.11 a share. Its operating margin is -50.55%, which ranks in the bottom 10% of the companies in Semiconductors industry. Overall, GuruFocus ranks the profitability of Rubicon Technology at 2 out of 10, which indicates poor profitability. This is the revenue and net income of Rubicon Technology over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus’ research has found that growth is closely correlated with the long-term performance of a company’s stock. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company’s revenue and earnings are declining, the value of the company will decrease. Rubicon Technology’s 3-year average revenue growth rate is in the middle range of the companies in Semiconductors industry. Rubicon Technology’s 3-year average EBITDA growth rate is 47.9%, which ranks better than 87% of the companies in Semiconductors industry.
One can also evaluate a company’s profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Rubicon Technology’s ROIC is -36.49 while its WACC came in at 4.08. The historical ROIC vs WACC comparison of Rubicon Technology is shown below:
In summary, Rubicon Technology (NAS:RBCN, 30-year Financials) stock is estimated to be fairly valued. The company’s financial condition is strong and its profitability is poor. Its growth ranks better than 87% of the companies in Semiconductors industry. To learn more about Rubicon Technology stock, you can check out its 30-year Financials here.
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