Is Iridium Communications (IRDM) Now A Potential Opportunity After Multi‑Year Share Price Slump

• Wondering whether Iridium Communications is attractively priced or just looks cheap on the surface? This article aims to help you frame that question clearly before you decide what to do next.
• The stock last closed at US$18.00, with returns of 3.6% over 7 days, 1.1% over 30 days and 1.4% year to date, but a 36.4% decline over 1 year and a 68.1% decline over 3 years may be front of mind for longer term holders.
• Recent attention on Iridium has largely centred on how investors interpret these mixed return figures and what they imply for sentiment around satellite connectivity businesses. This has put the question of what counts as a reasonable price for Iridium back on the radar for many readers.
• In our framework, Iridium scores 4 out of 6 on the valuation checks, as shown in this 4 out of 6 valuation score. Next we will look at how different valuation approaches line up, then finish with a way of thinking about value that can be even more useful than any single metric.

Find out why Iridium Communications's -36.4% return over the last year is lagging behind its peers.

Approach 1: Iridium Communications Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes estimates of the cash a business may generate in the future and discounts those amounts back to today, to arrive at an estimate of what the company could be worth right now.

For Iridium Communications, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $312.9 million. Analyst inputs and subsequent extrapolations suggest free cash flows in the coming years that reach a projected $413.9 million in 2030. Values between 2026 and 2035 are discounted back to today and then summed.

Bringing all those discounted cash flows together gives an estimated intrinsic value of US$68.08 per share. Compared with the recent share price of US$18.00, the DCF result implies the stock trades at a 73.6% discount to that intrinsic estimate. This suggests the market price is well below what this particular cash flow model indicates.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Iridium Communications is undervalued by 73.6%. Track this in your watchlist or portfolio, or discover 884 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Iridium Communications.

Approach 2: Iridium Communications Price vs Earnings

For a profitable business, the P/E ratio is a useful shorthand for how much investors are willing to pay for each dollar of current earnings. It links the share price directly to profits, which tend to be a core driver of long term value for many companies.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk often lines up with a lower multiple.

Iridium Communications currently trades on a P/E of 14.98x. That is below the Telecom industry average P/E of 16.29x and above the peer group average of 6.75x. Simply Wall St’s Fair Ratio for Iridium is 15.53x. This Fair Ratio is a proprietary estimate of what the P/E could be given the company’s earnings profile, industry, profit margins, market value and specific risks.

Compared with simple peer or industry comparisons, the Fair Ratio aims to be more tailored because it adjusts for growth, risk, margins, industry and size rather than relying on broad group averages. With the current P/E of 14.98x sitting modestly below the Fair Ratio of 15.53x, this metric suggests that the shares may be slightly undervalued.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Iridium Communications Narrative

Earlier we mentioned that there is an even better way to think about valuation, and on Simply Wall St that is through Narratives. Narratives let you spell out your own story for Iridium Communications by linking your assumptions for future revenue, earnings and margins to a forecast. This can then be turned into a Fair Value and compared with today’s price to help you decide whether the gap between the two is large enough to act on. You can then keep that view current as new news or earnings arrive. One investor on the Community page might build a Narrative that leans closer to the higher US$45 analyst target, while another leans closer to the US$16 target. Yet both are using the same tool to connect their view of Iridium’s satellite partnerships, competition and cash flows to a clear number they can track over time.

Do you think there's more to the story for Iridium Communications? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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