Should I buy Zoom Video Communications (ZM) – Zacks – Investor Services
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At first glance, Zoom’s headline numbers looked solid. However, Zoom’s growth continues to decelerate, and its guidance indicates that the slowdown will continue.
Let’s take a closer look at Zoom’s growth rates, outlook, and valuations to see if it’s still a worthy investment. Zoom was already generating robust growth back in fiscal , which ended in January of that year, before the pandemic hit. When the pandemic forced more people to attend classes and work remotely, its growth accelerated to breakneck levels in fiscal However, those tailwinds waned throughout fiscal as vaccination rates rose and more people physically returned to classrooms and offices:.
Both of those forecasts surpassed analysts’ expectations and indicated the company could still generate impressive double-digit growth on top of its triple-digit growth last year.
Those estimates will likely be raised after its latest report, but they still imply the company will face increasingly difficult year-over-year comparisons as the pandemic ends. Zoom also faces tougher competition in that slowing market. Last quarter, Microsoft said organizations had more than , Teams users, and more than 3, organizations had over 10, Teams users.
But Microsoft isn’t killing Zoom yet. However, Zoom is still aware that it needs to expand its ecosystem beyond video calls to stay competitive. The deal was called off in September, but Zoom is still working closely with Five9 to expand its cloud-communications capabilities. Zoom also recently started testing out post-video ads for its free users. Those ads might enable Zoom to monetize the tens of millions of free, loss-leading users that it gained throughout the pandemic and stabilize its revenue growth, even as it gains fewer new users.
However, Zoom’s stock still isn’t cheap at 52 times forward earnings and 15 times next year’s sales. Those valuations would be reasonable if Zoom’s growth rates were more predictable, but they’re simply too hot for a company in the midst of an ongoing slowdown. Salesforce’s stock trades at 66 times forward earnings and just nine times next year’s sales. I own some shares of Zoom, but I don’t think it’s the right time to double down on this polarizing stock yet.
Zoom has an attractive brand and a sticky platform, but it’s unclear if it can continue generating double-digit sales growth as the pandemic ends and Microsoft aggressively expands Teams.
Instead, I’d monitor Zoom’s growth over the next few quarters to see if its year-over-year growth stabilizes before buying any more shares. Cost basis and return based on previous market day close. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members.
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– Buying Zoom Stock? Here’s What You Need to Know – NerdWallet
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For example, a regional bank would be classified in the Finance Sector. This allows the investor to be as broad or as specific as they want to be when selecting stocks. The X Industry values displayed in this column are the median values for all of the stocks within their respective industry. When evaluating a stock, it can be useful to compare it to its industry as a point of reference.
Moreover, when comparing stocks in different industries, it can become even more important to look at the relative measures, since different stocks in different industries have different values that are considered normal. Zacks Premium – The way to access to the Zacks Rank. As an investor, you want to buy srocks with the highest probability of success. This is also referred to as the cash yield.
Like the earnings yield, which shows is zoom a good stock anticipated yield or return on a stock based on the earnings and the price paid, the cash is zoom a good stock does the same, but with cash being the numerator instead of earnings. Many investors prefer EV to just Market Cap as a better way to determine the value of a company. That means these items are added back into the net income to produce is zoom a good stock earnings number.
Since there is a fair amount of discretion in what’s included and not included in the ‘ITDA’ portion of this calculation, it is considered a non-GAAP metric.
Conventional wisdom says that a PEG ratio of 1 or less is considered good at par or undervalued to its growth rate.
A value greater than 1, in general, is not as good overvalued to its growth rate. So the PEG ratio tells you what you’re paying for each unit of earnings growth. Book value is defined as total assets minus liabilities, preferred stocks, and intangible assets. In short, this is how much a company is worth. Investors use this metric to determine how a company’s stock price stacks up to its intrinsic value. Note; companies will typically sell for more than their book value in much the same way that a company will sell at a multiple of its earnings.
So, as with other valuation metrics, it’s a good idea to compare it to its relevant industry. It’s another great way to determine whether a company is undervalued or overvalued with the denominator being cash flow. A value under 20 is generally considered good. Our testing substantiates this with the optimum range for price performance between It is the most commonly used metric for determining a company’s value relative to its earnings.
In this example, we are using the consensus earnings estimate for the Current Fiscal Is zoom a good stock F1. In general, a is zoom a good stock number or multiple is usually considered better that a higher one. In general, the lower the ratio is the better.
It’s calculated as earnings divided by price. A yield of 8. The most common way this ratio is used is to compare it to other stocks and to compare it to the 10 Year T-Bill. Conversely, if the yield on stocks is higher than the 10 Yr.
Since bonds and stocks compete for investors’ dollars, a higher yield typically needs to be paid to the stock investor for the extra risk being assumed vs. It is used to help gauge a company’s financial health. A higher number means the company has more debt to equity, whereas a lower number means it has less debt to equity. When comparing this ratio to different stocks in different industries, take note that some businesses are more capital intensive than others. So it’s a good idea to compare a stock’s debt to equity ratio to its industry to see how it stacks up to its peers first.
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This longer-term historical perspective lets the user see how a company has grown over time. Note: there are many factors that can influence the longer-term number, not the least of which is zoom a good stock the overall state of the economy recession will reduce this number for example, while a recovery will inflate itwhich can skew comparisons when looking out over shorter time frames.
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Many other growth items are considered as well. But, typically, an aggressive growth trader will be interested in the higher growth rates. Cash Is zoom a good stock is net income plus depreciation and other non-cash charges. A strong cash flow is important for covering interest payments, particularly for highly leveraged companies. Cash Flow is a measurement of a company’s health.
It’s typically categorized as a valuation metric and is most often quoted as Cash Flow per Share and as a Price to Cash flow ratio. In this case, it’s the cash flow growth that’s being looked at.
A positive change in the is zoom a good stock flow is desired and shows that more ‘cash’ is coming in than is zoom a good stock going out.