Valuation Scorecard: Stock Rating C-High Neutral (2/27/24)-Spok Holdings Inc (SPOK).

Over the next 6 years, Spok Holdings shares will need to reach $30 to achieve average annual stock market performance of 9.0%. Spok Holdings’ stock price will need to reach $35 by 2029 to achieve upper quartile performance. As reflected at the current price of $18, what future Spok Holdings operating performance is the market anticipating?

Executive Summary

• Spok Holdings’ important characteristics: stability, above average expected growth, high profitability, and below average financial strength. A big positive influence on Spok Holdings’ valuation is its superior Profitability.
• High valuation, leading shareholder returns. Current valuation levels are high relative to the Spok Holdings Peer Group. Recent market returns have significantly outperformed the Spok Holdings Peer Group. Total shareholder returns expected to lag the overall equity market. Based on current investor expectations, Spok Holdings shares should reach a level of $17 by 2029 — an 7.8% per year total shareholder return. A 2029 stock price of $30 would reflect median performance and a price of $35 would be required to reach upper quartile performance.
• Spok Holdings’ past growth is slightly below average. Historical growth has been below average relative to the Spok Holdings Peer Group and forecasted growth is relatively high. Revenue Growth, Asset Growth, and Equity Growth have lagged. These factors have negatively affected market perceptions of Spok Holdings. Spok Holdings’ historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth and return on equity has been stable.
• Profitability has been Spok Holdings’ biggest valuation strength. Asset Turnover, Pretax Margin, and Pretax ROA are group leading. These factors have strengthened market perceptions of Spok Holdings. The company has normal cash needs.
• Spok Holdings’ risk profile is very favorable. Overall variability has been relatively low with relatively low revenue variability, above average E.P.S. variability, and very low stock price volatility. Financial Strength is only average and earnings’ expectations are only average. The debt/capital ratio has declined.

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