Citrix Systems: A Screaming Buy
Citrix Systems (CTXS) announced fourth quarter ended December 31, 2015 total revenue of $905 million, up 6 percent year-over-year from $852 million during the same period last year. Moving ahead, net revenue for first quarter of 2016 is projected to be in the range of $785 to $790 million.
Citrix declared fourth quarter of 2015 non-GAAP net income of $259 million, or $1.66 per diluted share, up 44 percent year-over-year from $180 million, or $1.10 per diluted share in fourth quarter of 2014.
The mobile networking company reported continued year-over-year growth in both its top and bottom lines primarily due to satisfactory growths across the product, license, and software-as-a-service business segments.
Citrix is forecasted to deliver significant year-over-year expanding bottom line growth with notably logical company valuations and impressive long-term projected earnings growth of 14.37%, primarily driven by significant customer traction for the company’s innovative set of products and services.
Going forward, Citrix is targeting strategic restructuring program for the quarter and more by laying-off approximately 1,000 full-time and on-contract workers which is believed to improve upon the company’s total cash position. In addition, the company is expected to improve its EBIT cash margin in the range of approximately 30% to 32% during 2017 post strategic realignment of its business including, the planned spinoff of the company’s GoTo businesses. Further, Citrix projects the quarter end sustainable free cash flow margin of nearly 9%. The key technology company reported fourth quarter of 2015 net operating cash flows of $282 million as against $190 million during the same period last year and this significant cash flow growth is allowed by the company’s planned cost control efforts executed all through the quarter.
The networking technology company is expected to drive sustainable long-term growth, enabled by significant free cash flow growth and driven by planned sales of the company’s non-core operations along with strategic workforce optimization.
Importantly, The Board of Directors at Citrix Systems recently authorized to buy back an extra $400 million worth of its common stock with nearly $33 million worth of common stock still remaining under the current share repurchase authorization as of December 31, 2015 and in line with the company’s continued commitment to deliver improved shareholder returns.
Keith Weiss, a key investment analyst maintained a target price of $70 for Citrix Systems and expects that the company might find it difficult to maintain or grow its top line amid fiercely competitive global markets and despite, minimizing non-core expenditures.
Overall, the investors are advised to purchase equity in Citrix Systems, Inc. looking at the company’s healthy growth prospects with PEG ratio of 0.91 and comparable to the industry’s growth average of 1.47. The profit margin of 9.75% seems satisfactory. However, the trailing P/E and forward P/E ratios of 32.32 and 12.16 respectively indicate the stock’s overvaluation compared to somewhat logical industry’s average P/E of 21.54. Still, the company‘s needs to optimize its debt-burdened balance sheet with significant total debt of $1.32 billion against weaker total cash position of $871.37 million only, restricting the company to make future growth investments.