NTCT - Embedded Expectations Analysis - 2021 03 08
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 winsSpecifically, 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
NetScout Systems provides service assurance and security solutions that are used by customers to assure their digital business services against disruption. Using its Adaptive Service Intelligence technology, the company's solutions convert network traffic data, often referred to as wire data, into metadata, or smart data, the company's offerings can help customers identify and troubleshoot network and application performance issues, defend their networks from distributed denial of service attacks, and find and isolate network threats. The company's products are categorized as service assurance solutions for network and application performance, and business intelligence analytics and cybersecurity solutions.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- 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
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- 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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