Weekly Equity Idea Highlight - 2018 05 16
Current market expectations for CTXS are overly pessimistic. While UAFRS-based (Uniform) ROA is projected to rebound in 2018 after the decline in 2017, the market is expecting returns to remain at 10-year historical low levels going forward, with growth at the low end of historical averages. However, post-Go To the business is positioned for substantial growth opportunities going forward. This is likely to warrant sustained growth and ROA' stability to improvement going forward.Management's compensation framework likely focuses them on sustaining growth while also improving margins, which further aligns them to not let growth compress going forward, signaling expectations are overly negative.
Also, management generated markers in Q1 that showed a continued positive inflection and building confidence from management in their outlook. Management had renewed confidence about customer adoption of their cloud solutions, their networking wins overall, and their partnership with Microsoft.
Considering low market expectations, favorable macro trends for the company, strong management alignment, and management's building confidence about positive fundamental momentum for the business, current low equity valuations appear unreasonable, spelling potential for equity upside.
Citrix Systems is an enterprise software company. The company markets and licenses its solutions through multiple channels worldwide, including selling through resellers, direct and over the Web. The company's partner community comprises thousands of value-added resellers known as Citrix Solution Advisors, value-added distributors, systems integrators, independent software vendors, original equipment manufacturers and Citrix Service Providers. The company provides solutions and services that it categorizes into three inter-related and complementary areas: Workspace, Networking and Professional Services.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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