Is Iridium Communications (NASDAQ:IRDM) Undervalued?

Iridium Communications Inc (NASDAQ:IRDM) has been experiencing significant volatility, with a daily gain of 4.33% but a 3-month loss of -18.24%. The company’s recent Loss Per Share of 0.15 has raised questions about its current valuation.

Iridium Communications offers voice and data communications services to businesses, government agencies, and other customers globally. It provides mobile voice and data communications services through its low earth-orbiting satellites and caters to industries such as maritime, aviation, government/military, emergency/humanitarian services, mining, forestry, oil and gas, heavy equipment, transportation, and utilities. The company also serves subscribers from the U.S. Department of Defense and other civil and government agencies worldwide.

The GF Value, a proprietary measure used to estimate a stock’s fair value, suggests that Iridium Communications stock is modestly undervalued. This estimation takes into account historical multiples, the company’s past business growth, and analyst estimates of future performance. At $49.61 per share, the current stock price appears to be modestly undervalued.

While the stock’s valuation suggests potential future returns, it is important to assess the company’s financial strength and profitability. Iridium Communications has a cash-to-debt ratio of 0.07, indicating a poor balance sheet. In terms of profitability, the company has been profitable in 6 out of the past 10 years and has a fair operating margin of 5.65%. Its 3-year average annual revenue growth is 7.4%, outperforming a majority of companies in the Telecommunication Services industry.

Comparing the company’s return on invested capital (ROIC) to the weighted average cost of capital (WACC) can also provide insights into its profitability. Iridium Communications has an ROIC of 0.9, which is lower than its WACC of 8.55%, suggesting that the company is not creating value for shareholders.

In conclusion, Iridium Communications stock appears to be modestly undervalued. While the company’s financial condition is poor and its profitability is fair, its growth ranks better than a majority of companies in the industry.