Zoom Communications, Inc. Fundamental Analysis
Zoom Communications, Inc. (ZM) shows strong financial fundamentals with a PE ratio of 15.08, profit margin of 41.99%, and ROE of 21.79%. The company generates $4.9B in annual revenue with moderate year-over-year growth of 3.05%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 78.0/100 based on profitability, valuation, growth, and balance sheet metrics. The B grade reflects solid fundamentals with room for improvement in valuation or growth.
Fundamental Health Score
We analyze ZM's fundamental strength across five key dimensions:
Efficiency Score
ExcellentZM demonstrates superior asset utilization.
Valuation Score
ExcellentZM trades at attractive valuation levels.
Growth Score
ModerateZM shows steady but slowing expansion.
Financial Health Score
ExcellentZM maintains a strong and stable balance sheet.
Profitability Score
ExcellentZM achieves industry-leading margins.
Key Financial Metrics
Is ZM Expensive or Cheap?
P/E Ratio
ZM trades at 15.08 times earnings. This indicates a fair valuation.
PEG Ratio
When adjusting for growth, ZM's PEG of 0.15 indicates potential undervaluation.
Price to Book
The market values Zoom Communications, Inc. at 3.13 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 24.76 times EBITDA. This signals the market has high growth expectations.
How Well Does ZM Make Money?
Net Profit Margin
For every $100 in sales, Zoom Communications, Inc. keeps $41.99 as profit after all expenses.
Operating Margin
Core operations generate 24.17 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $21.79 in profit for every $100 of shareholder equity.
ROA
Zoom Communications, Inc. generates $17.03 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Zoom Communications, Inc. generates strong operating cash flow of $2.01B, reflecting robust business health.
Free Cash Flow
Zoom Communications, Inc. generates strong free cash flow of $1.95B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $6.66 in free cash annually.
FCF Yield
ZM converts 6.37% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
15.08
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
0.15
vs 25 benchmark
P/B Ratio
Price to book value ratio
3.13
vs 25 benchmark
P/S Ratio
Price to sales ratio
6.31
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.006
vs 25 benchmark
Current Ratio
Current assets to current liabilities
4.22
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.22
vs 25 benchmark
ROA
Return on assets percentage
0.17
vs 25 benchmark
ROCE
Return on capital employed
0.12
vs 25 benchmark
How ZM Stacks Against Its Sector Peers
| Metric | ZM Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 15.08 | 37.32 | Better (Cheaper) |
| ROE | 21.79% | 993.00% | Weak |
| Net Margin | 41.99% | 5975589423.00% | Weak |
| Debt/Equity | 0.01 | 0.41 | Strong (Low Leverage) |
| Current Ratio | 4.22 | 116.24 | Strong Liquidity |
| ROA | 17.03% | -297552.00% (disorted) | Strong |
ZM outperforms its industry in 4 out of 6 key metrics, particularly excelling in ROA, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Zoom Communications, Inc.'s 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
468.42%
Industry Style: Growth, Innovation, High Beta
High GrowthEPS CAGR
2928.60%
Industry Style: Growth, Innovation, High Beta
High GrowthFCF CAGR
871.58%
Industry Style: Growth, Innovation, High Beta
High Growth