SYNNEX Corporation (NYSE:SNX) is expected to report earnings on Tuesday after the market closes. The company's shares last traded at $122.86 as of Thursday afternoon, approximately 96% of its 52 week high. Finbox.io fair value data implies that the stock is currently 27% overvalued while Wall Street's consensus price target of $112.00 implies 9% downside.
Comparable Company Analysis
SYNNEX's financial performance has generally lagged its industry peers. More specifically, the company's historical and projected EBITDA growth looks unattractive when compared to Arrow Electronics, Inc. (NYSE:ARW), Avnet, Inc. (NYSE:AVT), Anixter International Inc. (NYSE:AXE) and CDW Corporation (NasdaqGS:CDW).
SYNNEX's LTM EBITDA growth of 2.0% is only above AVT (-6.3%) and below ARW (11.7%), AXE (3.1%) and CDW (12.5%). Furthermore, when comparing Wall Street's consensus forecast for each company, SNX's projected 5yr EBITDA CAGR of 5.5% is generally in line with its peers.
However, the company's forward EBITDA multiple of 11.0x is above all of the comparable companies: ARW (7.9x), AVT (9.8x), AXE (10.3x) and CDW (10.3x).
Typically, higher growth stocks will trade at higher multiples of EBITDA but this isn't the case for SYNNEX. The company's growth is mediocre but the market appears to be valuing its cash flows at a premium.
SYNNEX appears fundamentally overvalued when inputting consensus Wall Street projections into various discounted cash flow (DCF) analyses and dividend discount models (DDM) as shown in the football field analysis below.
Value investors who are long the stock may want to take a closer look prior to earnings Tuesday.
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Note this is not a buy or sell recommendation on SNX. It is purely an overview of the stock's underlying fundamentals so that investors can come to an informed decision.