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NTCT – Market expectations are for record-high Uniform ROA, but management may have concerns about free cash flow, subscriptions, and Construction Cloud

March 8, 2021

  • NetScout Systems, Inc. (NTCT:USA) currently trades above historical averages relative to UAFRS-based (Uniform) earnings, with a 36.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about the capabilities of their security offerings, the pace of their share repurchases, and the sustainability of deal wins
  • Specifically, management may be overstating the capabilities of their security offerings, the strength of OTT traffic, and interest in cybersecurity solutions, particularly from the Fed. In addition, they may lack confidence in their ability to sustain deal wins and enhance profitability in the current macro environment. Furthermore, they may have concerns about their virtual Engage 2021 Technology and User Event, their current liquidity position, and continued declines in accounts receivable. Finally, they may be concerned about the timeline for their share buyback program execution, and they may be exaggerating the diversity and financial value of the offerings they provide to clients