Latest news with #INMD
Yahoo
5 hours ago
- Business
- Yahoo
InMode Ltd.'s (NASDAQ:INMD) Stock Been Rising: Are Strong Financials Guiding The Market?
InMode's (NASDAQ:INMD) stock up by 3.3% over the past month. Since the market usually pay for a company's long-term financial health, we decided to study the company's fundamentals to see if they could be influencing the market. In this article, we decided to focus on InMode's ROE. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. How Do You Calculate Return On Equity? Return on equity can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for InMode is: 28% = US$179m ÷ US$628m (Based on the trailing twelve months to June 2025). The 'return' is the yearly profit. That means that for every $1 worth of shareholders' equity, the company generated $0.28 in profit. View our latest analysis for InMode What Has ROE Got To Do With Earnings Growth? So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don't share these attributes. InMode's Earnings Growth And 28% ROE To begin with, InMode has a pretty high ROE which is interesting. Additionally, the company's ROE is higher compared to the industry average of 11% which is quite remarkable. Probably as a result of this, InMode was able to see a decent net income growth of 14% over the last five years. As a next step, we compared InMode's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 13% in the same period. Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. What is INMD worth today? The intrinsic value infographic in our free research report helps visualize whether INMD is currently mispriced by the market. Is InMode Efficiently Re-investing Its Profits? Given that InMode doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business. Summary Overall, we are quite pleased with InMode's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. That being so, according to the latest industry analyst forecasts, the company's earnings are expected to shrink in the future. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
24-05-2025
- Business
- Yahoo
Is There An Opportunity With InMode Ltd.'s (NASDAQ:INMD) 35% Undervaluation?
Using the 2 Stage Free Cash Flow to Equity, InMode fair value estimate is US$21.85 InMode's US$14.23 share price signals that it might be 35% undervalued The US$17.25 analyst price target for INMD is 21% less than our estimate of fair value Does the May share price for InMode Ltd. (NASDAQ:INMD) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to their present value. Our analysis will employ the Discounted Cash Flow (DCF) model. Before you think you won't be able to understand it, just read on! It's actually much less complex than you'd imagine. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. Our free stock report includes 2 warning signs investors should be aware of before investing in InMode. Read for free now. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. In the first stage we need to estimate the cash flows to the business over the next ten years. Seeing as no analyst estimates of free cash flow are available to us, we have extrapolate the previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF ($, Millions) US$109.8m US$103.2m US$99.8m US$98.4m US$98.2m US$99.0m US$100.4m US$102.3m US$104.6m US$107.1m Growth Rate Estimate Source Est @ -9.83% Est @ -6.00% Est @ -3.32% Est @ -1.44% Est @ -0.13% Est @ 0.79% Est @ 1.44% Est @ 1.89% Est @ 2.20% Est @ 2.42% Present Value ($, Millions) Discounted @ 9.2% US$101 US$86.6 US$76.6 US$69.2 US$63.3 US$58.4 US$54.2 US$50.6 US$47.4 US$44.4 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$651m After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 9.2%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = US$107m× (1 + 2.9%) ÷ (9.2%– 2.9%) = US$1.8b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$1.8b÷ ( 1 + 9.2%)10= US$730m The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$1.4b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$14.2, the company appears quite undervalued at a 35% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at InMode as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.2%, which is based on a levered beta of 0.970. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. See our latest analysis for InMode Strength Currently debt free. Weakness Earnings declined over the past year. Opportunity Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to decline for the next 3 years. Although the valuation of a company is important, it is only one of many factors that you need to assess for a company. DCF models are not the be-all and end-all of investment valuation. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For InMode, we've compiled three relevant items you should further examine: Risks: Every company has them, and we've spotted 2 warning signs for InMode you should know about. Future Earnings: How does INMD's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
10-03-2025
- Business
- Yahoo
Is InMode Ltd.'s (NASDAQ:INMD) Recent Stock Performance Tethered To Its Strong Fundamentals?
InMode's (NASDAQ:INMD) stock is up by a considerable 5.4% over the past month. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Specifically, we decided to study InMode's ROE in this article. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. View our latest analysis for InMode Return on equity can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for InMode is: 26% = US$181m ÷ US$704m (Based on the trailing twelve months to December 2024). The 'return' is the yearly profit. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.26. So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don't share these attributes. To begin with, InMode has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 13% also doesn't go unnoticed by us. This likely paved the way for the modest 19% net income growth seen by InMode over the past five years. As a next step, we compared InMode's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 13%. Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Has the market priced in the future outlook for INMD? You can find out in our latest intrinsic value infographic research report. InMode doesn't pay any regular dividends, meaning that all of its profits are being reinvested in the business, which explains the fair bit of earnings growth the company has seen. Overall, we are quite pleased with InMode's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. Having said that, on studying current analyst estimates, we were concerned to see that while the company has grown its earnings in the past, analysts expect its earnings to shrink in the future. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
