Software Stocks

Citrix Systems Inc Valuation – February 2018 $CTXS

Company Profile (obtained from Marketwatch): Citrix Systems, Inc. designs, develops and markets technology solutions. It markets and licenses its products directly to customers through web, systems integrators, value-added resellers and service providers. The company operates its business through two segments: Enterprise & service provider and GoTo Business. The Enterprise & service provider segment is comprised of workspace services, mobile and delivery networking products. The GoTo Business segment is comprised of communications cloud, documents cloud and workflow cloud products. It offers workspace service solutions, delivery networking products, cloud service products and related license updates & maintenance and professional services. Citrix Systems was founded by Edward E. Iacobucci on April 17, 1989 and is headquartered in Fort Lauderdale, FL.

CTXS Chart

CTXS data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CTXS – February 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,525,874,244 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.55 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 84.40% Pass
6. Moderate PEmg Ratio PEmg < 20 35.42 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 14.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.55 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.28 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.60
MG Growth Estimate 8.07%
MG Value $64.01
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $37.66
MG Value based on 0% Growth $22.08
Market Implied Growth Rate 13.46%
Current Price $92.00
% of Intrinsic Value 143.74%

Citrix Systems, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.69 in 2014 to an estimated $2.6 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.46% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Citrix Systems, Inc. revealed the company was trading above its Graham Number of $26.56. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 35.42, which was below the industry average of 38.79, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-14.43.

Citrix Systems, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.43
Graham Number $26.56
PEmg 35.42
Current Ratio 1.55
PB Ratio 14.17
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,621,423,000
Total Current Liabilities $1,687,079,000
Long-Term Debt $2,127,474,000
Total Assets $5,820,176,000
Intangible Assets $1,756,446,000
Total Liabilities $4,827,715,000
Shares Outstanding (Diluted Average) 152,860,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.76
Dec2017 -$0.13
Dec2016 $3.41
Dec2015 $1.99
Dec2014 $1.47
Dec2013 $1.80
Dec2012 $1.86
Dec2011 $1.87
Dec2010 $1.46
Dec2009 $1.03
Dec2008 $0.96
Dec2007 $1.14
Dec2006 $0.97
Dec2005 $0.93
Dec2004 $0.75
Dec2003 $0.70
Dec2002 $0.53
Dec2001 $0.54
Dec2000 $0.47
Dec1999 $0.61
Dec1998 $0.33

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.60
Dec2017 $1.58
Dec2016 $2.33
Dec2015 $1.79
Dec2014 $1.69
Dec2013 $1.73
Dec2012 $1.61
Dec2011 $1.42
Dec2010 $1.17
Dec2009 $1.02
Dec2008 $0.99
Dec2007 $0.97
Dec2006 $0.85
Dec2005 $0.76
Dec2004 $0.65
Dec2003 $0.59
Dec2002 $0.52

Recommended Reading:

Other ModernGraham posts about the company

Citrix Systems Inc. Annual Valuation – 2015 $CTXS

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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