Simple Concepts Research Group

VirnetX (NYSE: VHC) Is A Tech Company Worth Watching

by | Jan 20, 2022 | 52 Week Lows, Stock Picks

VirnetX Holding (VHC) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for VirnetX Holding (VHC) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

VirnetX Holding Fundamentals

VHC Stock Rating

Stock Price Target: $6.41

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for VirnetX Holding in comparison to the Software industry and the S&P 500.

VirnetX Holding is a Micro Cap company with a Market Cap of $177.7M.

How are investors using VirnetX earnings yield to assess the company?

VirnetX (VHC)_ Earnings Yield in Comparison to the Software Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for VirnetX is 112.36%, in comparison to 3.76% for the S&P 500 and 1.78% for the 10-year treasury bond. The median earnings yield for the Software industry is 3.06%.

What does VirnetX Price-to-Earnings Ratio (P/E) tell investors about the company?

VirnetX (VHC)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Software Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

VirnetX does not currently have a reported P/E. The P/E for the Software industry is 49.98 and the P/E for the S&P 500 is 26.59.

What is the current Price-to-Sales Ratio (P/S) for VirnetX?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

VirnetX is currently trading at a P/S of 0.55. The P/S for the Software industry is 12.44 and the P/S for the S&P 500 is 3.19.

How does VirnetX Price-to-BookRatio (P/B) compare to the Software industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

VirnetX P/B ratio is 0.74. The P/B for the Software industry is 14.52 and the P/B for the S&P 500 is 4.81.

How attractive is VirnetX Return on Invested Capital (ROIC) to investors?

VirnetX (VHC)_ Return on Invested Capital in Comparison to the Software Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

VirnetX ROIC is currently -19.19% in comparison to 15.30% for the Software industry and 9.10% for the S&P 500.

VirnetX (VHC)_ Price Target & 52-Week Price Range

How has VHC stock performed over the past year? What is the current analyst price target?

Over the past 52 weeks, VirnetX has traded between the range of $2.29 and $8.24.

The current Analyst Price Target for VirnetX is $6.41.

What is VirnetX YOY Performance in comparison to its industry and the total market?

The YOY performance for VirnetX is -56.09%. The Software industry has a YOY performance of 31.71% in comparison to the YOY S&P 500 performance of 20.29%.

VirnetX (VHC)_ YOY Performance in Comparison to the Software Industry and the S&P 500

Recent Financial Results

  • Total cash and short term investments of $172.5M
  • Net debt of -$172.5M
  • Gross profit of $9.5M
  • Operating income reported of -$18.7M
  • EBITDA -$18.7M

Stock Price Target: $6.41

Company Overview

VHC Stock Rating

VirnetX Holding Corporation operates as an Internet security software and technology company primarily in the US. The company develops software and technology solutions, including secure domain name registry and GABRIEL Connection Technology that are designed to secure communications over the Internet, as well as enable organizations and individuals to establish communities of secure, registered users, and transmit information between various devices, networks, and operating systems.

The company serves domain infrastructure and communication service providers, and system integrators; and enterprise customers, developers, and original equipment manufacturers of chips, servers, smart phones, tablets, e-Readers, laptops, net books, and other devices in the IP-telephony, mobility, fixed-mobile convergence, and unified communications markets. VirnetX Holding Corporation was incorporated in 2005 and is based in Zephyr Cove, Nevada. The current CEO is Kendall Larsen.

Be sure to add VirnetX Holding (VHC) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.