VG Soars 7.3% In A Single Day, Time To Buy The Stock?
We believe there is not much to fear in VG stock given its overall Strong operating performance and financial condition. Hence, despite its Moderate valuation, this makes the stock look Risky. Here is our multi-factor assessment.
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Moderate |
| What you get: | |
| Growth | Very Strong |
| Profitability | Very Strong |
| Financial Stability | Weak |
| Downturn Resilience | N/A |
| Operating Performance | Strong |
| Stock Opinion | Risky |
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Let’s get into details of each of the assessed factors but before that, for quick background: With $34 Bil in market cap, Venture Global provides home telephone services with basic features and cloud-native unified communication solutions across the US, Canada, UK, EU, and Asia.
[1] Valuation Looks Moderate
| VG | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 4.1 | 3.3 |
| Price-to-Earnings Ratio | 23.1 | 24.0 |
| Price-to-Free Cash Flow Ratio | -3.3 | 21.1 |
This table highlights how VG is valued vs broader market.
[2] Growth Is Very Strong
- Venture Global has seen its top line grow at an average rate of 62.2% over the last 3 years
- Its revenues have grown 62% from $5.2 Bil to $8.4 Bil in the last 12 months
- Also, its quarterly revenues grew 179.9% to $3.1 Bil in the most recent quarter from $1.1 Bil a year ago.
| VG | S&P 500 | |
|---|---|---|
| 3-Year Average | 62.2% | 5.3% |
| Latest Twelve Months* | 62.2% | 5.1% |
| Most Recent Quarter (YoY)* | 179.9% | 6.1% |
This table highlights how VG is growing vs broader market.
[3] Profitability Appears Very Strong
- VG last 12 month operating income was $2.9 Bil representing operating margin of 34.4%
- With cash flow margin of 41.7%, it generated nearly $3.5 Bil in operating cash flow over this period
- For the same period, VG generated nearly $1.5 Bil in net income, suggesting net margin of about 17.7%
| VG | S&P 500 | |
|---|---|---|
| Current Operating Margin | 34.4% | 18.6% |
| Current OCF Margin | 41.7% | 20.3% |
| Current Net Income Margin | 17.7% | 12.7% |
This table highlights how VG profitability vs broader market.
[4] Financial Stability Looks Weak
- VG Debt was $30 Bil at the end of the most recent quarter, while its current Market Cap is $34 Bil. This implies Debt-to-Equity Ratio of 88.6%
- VG Cash (including cash equivalents) makes up $2.2 Bil of $47 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.8%
| VG | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 88.6% | 21.0% |
| Current Cash-to-Assets Ratio | 4.8% | 7.0% |
[4] Downturn Resilience Is N/A
VG has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.