This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Pessimistic market outlook for growth and ROA’, with favorable management alignment, strategic positioning positive fundamental momentum and operational execution points to equity upside
CTXS is trading at a 20.2x UAFRS-based P/E (V/E’), at the higher end of historical valuations, though a 4.9x UAFRS-based P/B (V/A’) is around historical lows. The market is expecting the recent decline in adjusted ROA (ROA’) from 37% to 30% to persist, with ROA’ dropping to around 23% levels going forward, with relatively modest Asset’ growth of 7%-8% relative to their historical double-digit growth. This is in line with analyst expectations for 2017, however unlike the markets, analysts recognize the company is likely to see returns rebound in 2018 as they progress with their new strategy. Analysts forecast ROA’ to bounce back to 28% levels by 2018. With CTXS’ core position around major developing areas after the sale of the Go To business, including mobile and virtualization efforts for Enterprise, and around cloud initiatives, all areas where they have strong positions, market pessimism appears much too overstated. They are seeing much stronger tailwinds than the market is recognizing.