JPMorgan Says Citrix (CTXS) Undervalued

NEW YORK (TheStreet) -- JPMorgan has given cloud computing specialist Citrix Systems (CTXS) an upgrade on the basis of a valuation call. The investment bank upgraded Citrix to "overweight" from "neutral." 

TheStreet Ratings team rates CITRIX SYSTEMS INC as a Hold with a ratings score of C+. The team has this to say about their recommendation:

"We rate CITRIX SYSTEMS INC (CTXS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and deteriorating net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.0%. Since the same quarter one year prior, revenues rose by 11.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $222.95 million or 23.18% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -14.95%.
  • CTXS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Software industry and the overall market, CITRIX SYSTEMS INC's return on equity is below that of both the industry average and the S&P 500.
  • CTXS has underperformed the S&P 500 Index, declining 13.34% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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