If you’re looking at Iridium Communications and wondering if the time is right to buy, hold, or cut your losses, you’re definitely not alone. The stock has taken some dramatic turns over the last few years. After a brief uptick this past week, with a gain of 1.1%, and a similar increase over the last month, the bigger picture is hard to miss: the shares are down close to 40% in the past year, and the five-year performance remains stubbornly negative at -28.4%. This is a company investors are trying to figure out, and swings in sentiment often have as much to do with risk perception as with the company’s underlying business moves.
Iridium sits at the intersection of satellite communications and changing market demand, two factors that can make its share price sensitive to tech trends and economic outlooks. While broader tech stocks have rebounded at times, Iridium’s unique market position has caused its stock to react more gradually, sometimes too gradually for impatient investors. Nevertheless, not all is doom and gloom. With a value score of 3 out of 6, the company checks off half the boxes for being undervalued right now, which may suggest potential opportunity for the right kind of investor.
To get a clearer picture of what’s really going on, let’s walk through the key ways analysts measure valuation, each with its own view on Iridium’s current price. Be sure to read through to the end for an additional framework to help you decide whether this stock might belong in your portfolio.
Why Iridium Communications is lagging behind its peers
A Discounted Cash Flow (DCF) model estimates what a company is worth by projecting its future cash flows and then discounting them back to their present value. This approach helps investors gauge whether a stock’s current price reflects its true earning potential.
For Iridium Communications, the most recent Free Cash Flow (FCF) stands at $333.37 Million. Analyst consensus expects growth in annual FCF, projecting it to reach $435.85 Million by 2029. Because analysts only forecast out five years, longer-term projections to 2035 are extrapolated and show further growth, albeit at gradually slower rates.
Using the two-stage Free Cash Flow to Equity DCF model, the estimated intrinsic (fair) value of Iridium stock comes to $101.76 per share. Compared to the current market price, this suggests a substantial discount of about 81.7% undervaluation.
For investors who value a company’s ability to generate cash, this model points to significant upside and indicates Iridium may be deeply undervalued at today’s prices.
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