Itron Inc (NASDAQ:ITRI) Presents a Compelling Value Investment Case

For investors looking to find companies trading for less than their true worth, a disciplined screening method is necessary. One useful method is to find stocks that show an attractive valuation while also keeping good basic business health. This means looking past a low price-to-earnings ratio to confirm the company is also earning money, financially stable, and able to grow in the future. Stocks that satisfy this combined group of conditions can be especially notable for value-focused investors, as they might be situations where the market has not completely acknowledged a company's lasting earnings ability or market position.

Itron Inc (NASDAQ:ITRI) is a technology and services company that works on systems to measure, manage, and study energy and water use. Based in Liberty Lake, Washington, Itron works in areas such as Device Solutions (hardware products for measurement and control), Networked Solutions (full systems with smart meters and communication networks), and Outcomes (advanced software and data analysis services). A look at its basic profile indicates it could match the description of a stock priced below its worth with a firm operational base.

Valuation: An Attractive Starting Price

The central idea of value investing is buying a dollar of assets for fifty cents. Itron's valuation numbers indicate the market might be providing such a lower price. Based on ChartMill's basic analysis, Itron receives a Valuation Rating of 7 out of 10, showing a good price compared to its financial results and similar companies.

• Price/Earnings Ratio: At 16.42, Itron's P/E ratio is much lower than 84% of similar companies in the Electronic Equipment, Instruments & Components industry, where the average P/E is above 38. It also trades at a clear discount to the wider S&P 500's P/E of 26.31.
• Forward-Looking Metrics: The valuation picture stays the same looking forward. Itron's Price/Forward Earnings ratio of 16.06 is lower than 82.4% of its industry rivals.
• Cash Flow & EBITDA: The company also seems low-priced based on cash production, with a Price/Free Cash Flow ratio more attractive than almost 90% of the industry. Its Enterprise Value to EBITDA ratio is better than 77.6% of similar companies.

This combined information forms a view of a stock priced cautiously by the market. For a value investor, these numbers give a factual reason for thinking a "margin of safety" could be present.

Profitability: Showing Quality Business Activity

A low-priced stock is only a worthwhile investment if the basic business is healthy. Itron's good profitability numbers help reduce the danger of a "value trap." The company has a high Profitability Rating of 8/10, indicating effective operations and good returns.

• Good Margins: Itron's Profit Margin of 10.69% and Operating Margin of 12.51% both put it in the high group of its industry, doing better than over 80% of rivals. Both margins have displayed upward movement in recent years.
• Effective Use of Capital: The company produces a sound Return on Invested Capital (ROIC) of 8.96%, more attractive than 78.4% of the industry. Importantly, its latest ROIC is much higher than its three-year average, showing an upward path in capital effectiveness.

These numbers are vital for the value argument. They show that Itron is not just a weak company with a low stock price, but a profitable business with pricing ability and operational control. This quality backs the idea that its current market price may not show its real earnings potential.

Financial Health: A Mixed Review

Financial health makes sure a company can survive economic slowdowns and keep spending for future development. Itron's Health Rating is a middle 5/10, offering a varied but acceptable view. Value investors need to examine balance sheet strength to confirm a low-priced company is not also carrying too much debt.

• Good Liquidity: The company displays positive short-term financial room with a Current Ratio of 2.17 and a Quick Ratio of 1.91, showing no urgent issue in paying its bills.
• Debt Points: Itron's Debt/Equity ratio of 0.47 suggests it does not rely too much on debt for funding. However, this ratio is less attractive compared to many industry peers. A good balancing point is its strong Debt to Free Cash Flow ratio of 3.65, meaning it could in theory pay off all debt in less than four years using its current cash flow, a ratio better than 68.8% of similar companies.

While not the top in its field, Itron's financial health does not seem to be a major fault. The company creates enough cash flow to handle its debt, providing a stable base from which to run its plans.

Growth: A Steadying Path

For a value investment to reach its possibility, some part of growth or stabilization is often required. Itron's Growth Rating of 5/10 shows a company changing, with past difficulties making room for more hopeful predictions.

• Earnings Movement: The company displays a good history in Earnings Per Share (EPS) growth, with an 11.11% average yearly rise over recent years. Experts think this will speed up, predicting average yearly EPS growth of 13.57% moving forward.
• Revenue Recovery: In the past, Itron's Revenue has seen small decreases. However, the future view expects a change, with estimates pointing to almost 5% yearly revenue growth. This expected increase from past patterns is a key good sign.

This growth outline is significant for the value approach. It suggests the company is not in a lasting condition of reduction but is set to expand into its valuation, possibly triggering a re-pricing by the market as future earnings appear.

Conclusion

Itron Inc offers an example in measured value investing. The stock trades at a clear discount to both its industry and the wider market based on several valuation numbers. Importantly, this low price is combined with clearly good profitability and a steadying growth view, which helps set it apart from a company in permanent trouble. While its financial health is middling, it is backed by strong cash flow production. For investors using a screen that looks for attractive value together with acceptable basics, Itron stands for the kind of candidate deserving of further careful study.

Interested in discovering more stocks that match this description? You can review other possible options using the Decent Value Stocks screen on ChartMill.

Disclaimer: This article is for information only and does not make up financial guidance, a suggestion, or an offer to buy or sell any securities. Investors should do their own study and talk with a qualified financial advisor before making any investment choices. The study is based on supplied information and may not be full or current.