Vertiv Holdings Co. (VRT) designs, produces, and services essential digital infrastructure technologies and life cycle services for data centers, communication networks, and commercial and industrial settings across the Americas, Asia Pacific, Europe, the Middle East, and Africa. The New York City company's shares have plunged nearly 58% in price over the past six months and 43.7% over the past month.
In addition, closing yesterday's trading session at $12, the stock is currently trading 58.3% below its 52-week of $28.8, which it hit on September 02, 2021.
In its recent fourth-quarter earnings release, the company cited inflation and supply chain constraints as major challenges that affected its growth. Furthermore, it failed to meet consensus estimates for revenue and earnings, raising concerns over its prospects.
Here's what could shape VRT's performance in the near term:
Mixed Financials
VRT's net sales increased 8% year-over-year to $1.41 billion for the three months ended Dec. 31, 2021. However, its operating loss came in at $3.9 million, compared to a $120 million operating profit in the prior year period. The company's net income declined 45.7% from the prior-year quarter to $22 million, while its EPS decreased 50% year-over-year to $0.06 over this period.
Mixed Profitability
VRT's 30.5% trailing-12-months gross profit margin is 4.7% higher than the 29.1% industry average Also, its 0.83% trailing-12-months asset turnover ratio is 6% higher than the 0.78% industry average.
However, VRT's 2.4% trailing-12-months net income margin is 63.5% lower than the 6.6% industry average. Also, its trailing-12-months ROA, EBITDA margin, and ROC are 66.6%, 25.1%, and 31.1%, lower than their respective industry averages.
POWR Ratings Reflect Uncertainty
VRT has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. VRT has an F grade for Growth and a D for Stability. The company's mixed profitability and financials are consistent with the Growth grade. In addition, the stock's 1.50 beta is in sync with the Stability grade.
Among the 91 stocks in the C-rated Industrial – Equipment industry VRT is ranked #65.
Beyond what I've stated above, one can view VRT ratings for Quality, Momentum, Value, and Sentiment here.
Bottom Line
VRT's stock has declined 51.9% in price year-to-date due to its unimpressive financial performance in its last reported quarter. Furthermore, the company expects no improvement in its supply chain crisis in 2022, which could further affect its operational performance. In addition, analysts expect its EPS to decline 176.2% in the current quarter (ending March 31, 2022) and 67.7% in the next quarter (ending June 30, 2022). Therefore, we believe investors should wait for its prospects to stabilize before investing in the stock.
How Does Vertiv Holdings Co. (VRT) Stack Up Against its Peers?
While VRT has an overall C rating, one might want to consider its industry peers, Standex International Corporation (SXI), Applied Industrial Technologies Inc. (AIT), and Allied Motion Technologies Inc. (AMOT), which have an overall A (Strong Buy) rating.
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VRT shares fell $0.32 (-2.67%) in premarket trading Thursday. Year-to-date, VRT has declined -53.22%, versus a -7.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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