Gen Digital Inc. (GEN) Stock Analysis
Gen Digital Inc. (GEN) Stock Analysis
Overall Grade: F (Concerning)
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Gen Digital Inc. faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 8.0% | Near cost of capital |
| FCF Margin | 32.1% | Strong cash generation |
| Debt/Equity | 3.6x | Elevated debt |
Investment Thesis: Healthy free cash flow margin of 32.1% provides financial flexibility for growth and shareholder returns.
What is Gen Digital Inc.'s Profitability and ROIC?
Gen Digital Inc.'s return on invested capital of 8.0% is around industry norms. Gross margin of 78.8% with operating margin at 36.7% reflects the company's strong market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 8.0% | Adequate | Adequate returns |
| Return on Equity (ROE) | 25.8% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 78.8% | Excellent | Strong pricing power |
| Operating Margin | 36.7% | Excellent | Efficient operations |
How Strong is Gen Digital Inc.'s Cash Flow Quality?
Gen Digital Inc. generated $1.5B in free cash flow over the trailing twelve months, representing a 32.1% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 2.6x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 32.1% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $1.5B | Good | Positive cash generation |
| OCF/Net Income | 2.6x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Gen Digital Inc.'s Financial Health?
Gen Digital Inc.'s debt-to-equity ratio of 3.6x indicates elevated leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 3.6x | Red flag | Elevated leverage |
| Net Cash Position | $-7.8B | Warning | Net debt position |
Is Gen Digital Inc. Stock Overvalued or Undervalued?
Gen Digital Inc. trades at a P/E of 26.6x, representing a premium to the sector median of N/A. Free cash flow yield of 9.5% offers attractive cash returns.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 26.6x | Adequate | Premium valuation |
| EV/Sales | 5.0x | Adequate | Growth premium priced in |
| FCF Yield | 9.5% | Excellent | Attractive cash return |
| Dividend Yield | 1.9% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 8.0% | Top 50% | 1.2x above |
| Free Cash Flow Margin | 32.1% | Top 25% | 3.2x above |
| Gross Margin | 78.8% | Top 25% | 1.5x above |
| Operating Margin | 36.7% | Top 5% | 5.8x above |
| Return on Equity (ROE) | 25.8% | Top 25% | 4.1x above |
| P/E Ratio | 26.6x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 8.0% (Adequate - Top 50% of sector (median: 6.5%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 32.1% (Excellent - Top 25% of sector (median: 10.0%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 78.8% (Excellent - Top 25% of sector (median: 52.9%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 360.5% (Red flag)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 26.6x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 9.5% (Excellent)
Frequently Asked Questions
Q: What is Gen Digital Inc.'s Return on Invested Capital (ROIC)?
Gen Digital Inc. (GEN) has a trailing twelve-month Return on Invested Capital (ROIC) of 8.0%. This compares above the sector median of 6.5%. An ROIC near 8-12% is approximately the cost of capital for most companies.
Q: What is Gen Digital Inc.'s Free Cash Flow Margin?
Gen Digital Inc. (GEN) has a free cash flow margin of 32.1%, generating $1.5 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is Gen Digital Inc. stock overvalued or undervalued?
Gen Digital Inc. (GEN) trades at a P/E ratio of 26.6x, which is above the sector median of N/A. The EV/Sales multiple is 5.0x. Free cash flow yield is 9.5%, which represents an attractive cash return to investors.
Q: Does Gen Digital Inc. pay a dividend?
Gen Digital Inc. (GEN) currently pays a dividend yield of 1.9%. Including share buybacks, the total shareholder yield is 4.6%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: How much debt does Gen Digital Inc. have?
Gen Digital Inc. (GEN) has a debt-to-equity ratio of 3.6x with total debt of $8.4 billion. Net debt position is $7.8 billion.
Q: What is Gen Digital Inc.'s revenue and earnings growth?
Gen Digital Inc. (GEN) grew revenue by 21.5% year-over-year. Earnings per share decreased by 4.9% compared to the prior year. Double-digit revenue growth indicates strong demand and market share gains.
Q: Is Gen Digital Inc. buying back stock?
Gen Digital Inc. (GEN) repurchased $434.0 million of stock over the trailing twelve months. This represents a buyback yield of 2.7%.
Q: How does Gen Digital Inc. compare to competitors in Technology?
Compared to other companies in Technology, Gen Digital Inc. (GEN) shows: ROIC of 8.0% is above the sector median of 6.5% (Top 47%). FCF margin of 32.1% exceeds the sector median of 10.0% (Top 12% of sector). Gross margin at 78.8% is 25.9 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Technology companies with available SEC filings.
Q: What warning signs should I watch for with Gen Digital Inc.?
Investors in Gen Digital Inc. (GEN) should monitor these potential warning signs: 1) Debt-to-equity of 3.6x is elevated. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-11-07. TTM metrics as of Q1 2026.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.