Analysts' Choice: Citrix Navigates Complex Networks

10/31/2016


  Recent Price
$84
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
16
  Shares (millions)
158
  Long-Term Debt As % Of Capital
0%
  52-Week Price Range
$90.00 - $60.91

Citrix Systems ($84; CTXS) has the kind of history that makes growth investors salivate.

• At least 21% higher per-share profits in each of the last six quarters, with average growth of 21% over the last five years. Profits have topped estimates in 14 consecutive quarters.

• Thirty consecutive quarters of higher sales.

• Operating-cash-flow growth of 21% over the last year and 14% annualized over the last decade.

Analysts expect the growth to keep coming, with the consensus calling for per-share earnings to expand 7% in 2017 and 10% annually over the next five years. Citrix's virtualization products are gaining popularity with health-care and higher-education consumers, while demand for application delivery controllers (tools for delivering software applications and managing data traffic over networks and mobile devices) continues to rise as workplaces become less static.

Software developer Citrix, poised to benefit from the increasing complexity of computer networks, is a Focus List Buy and a Long-Term Buy.

What Citrix does

The workspace-services unit (49% of revenue in the nine months ended September), rose 5% in the September quarter, lifted by an 18% increase in license revenue in the Americas.

Delivery networking (23%) posted 1% revenue growth in the September quarter. However, more than one-third of the 1,600 networking customers it served in the quarter were new, which bodes well for future growth.

The software-as-a-service business (28%) delivered 9% growth in the third quarter, with cloud-based services jumping 28%. Last month, U.S. regulators approved the planned $2.4 billion merger of Citrix's GoTo business with LogMeIn ($89; LOGM); the deal is expected to close in the first quarter of 2017. Citrix shareholders will own 50% of the combined company. GoTo accounts for about 85% of Citrix's software-as-a-service revenue.

Other reasons for optimism

Beyond its growth, Citrix also looks good through four other lenses:

1) Value: At 16 times trailing earnings, Citrix trades at a 39% discount to the median application-software developer in the S&P 1500 Index and 51% below its own three-year average P/E. In addition, Citrix sells at a discount of at least 24% to the industry median for price/operating cash flow and enterprise ratio.

2) Profitability. Operating margins have been trending higher for three years, reaching 28.2% in the 12 months ended September, up from 24.3% a year ago and 21.9% three years ago. The company expects operating margins of 32% to 33% next year. These ongoing efficiency improvements boost our confidence in consensus profit estimates.

3) Share repurchases. Citrix has aggressively bought back its own shares, shrinking the count 3% over the last year and 17% over the last three years.

4) Quadrix scores. Citrix earns an Overall score of 95 and ranks 95 or higher in both sector-specific scores.

You can obtain an annual report for Citrix Systems Inc. at 851 W. Cypress Creek Road, Fort Lauderdale, FL 33309, (954) 267-3000, www.citrix.com.

CITRIX SYSTEMS
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Sep '16
1.32
vs.
1.04
3%
89.50
-
78.57
18 - 15
Jun '16
1.20
vs.
1.00
6%
90.00
-
76.25
18 - 16
Mar '16
1.18
vs.
0.65
9%
79.16
-
60.91
18 - 14
Dec '15
1.66
vs.
1.10
6%
84.17
-
68.50
22 - 18
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2015
3.28
4.34
0.00
84.17
-
56.48
19 - 13
2014
3.14
3.30
0.00
72.89
-
51.18
22 - 16
2013
2.92
3.02
0.00
77.16
-
54.52
26 - 18
2012
2.59
2.87
0.00
87.99
-
56.57
31 - 20
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
95
90
63
91
77
90
54

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.
   NA Not available.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com