F5, Inc. (NASDAQ: FFIV)

Sector: Technology Industry: Software - Infrastructure CIK: 0001048695
Market Cap 15.59 Bn
P/B 4.34
P/E 22.52
P/S 5.05
ROIC (Qtr) 18.03
Div Yield % 0.00
Rev 1y % (Qtr) 8.49
Total Debt (Qtr) 230.75 Mn
Debt/Equity (Qtr) 0.06

About

F5, Inc. (FFIV) is a renowned player in the application delivery and security industry, which is currently experiencing rapid growth due to the rising demand for cloud-based and hybrid IT environments. The company's primary business activities involve developing, marketing, and selling a range of products and services that enable customers to deliver, secure, and optimize their applications and APIs. F5's operations span various countries and regions, with a diverse customer base that includes large enterprise businesses, public sector institutions,...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 949.67M provides robust 4.12x coverage of total debt 230.75M, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 3.88B provides 16.80x coverage of total debt 230.75M, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 906.41M exceeds capital expenditure of 43.26M by 20.95x, indicating strong organic growth funding capability.
  • Retained earnings of 3.57B provide full 15.46x coverage of long-term debt 230.75M, indicating strong internal capital position.
  • Robust tangible asset base of 3.88B provides 4.28x coverage of working capital 906.12M, indicating strong operational backing.

Bear case

  • Operating cash flow of 949.67M barely covers its investment activities of (219.49M), with a coverage ratio of -4.33, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (219.49M) provide weak support for R&D spending of 539.82M, which is -0.41x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 1.34B provide limited coverage of acquisition spending of (171.06M), which is -7.86x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 414.43M relative to inventory of 77.23M (5.37 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating cash flow of 949.67M provides insufficient coverage of deferred revenue obligations of 2B, which is 0.48x, raising concerns about future service delivery capabilities.

Peer comparison

Companies in the Software - Infrastructure
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MSFT Microsoft Corp 3,563.59 Bn 33.97 12.13 60.56 Bn
2 ORCL Oracle Corp 561.87 Bn 36.43 9.21 124.39 Bn
3 PLTR Palantir Technologies Inc. 413.65 Bn 377.64 106.17 0.24 Bn
4 PANW Palo Alto Networks Inc 126.45 Bn 113.19 13.23 0.35 Bn
5 CRWD CrowdStrike Holdings, Inc. 116.42 Bn -370.56 25.50 0.82 Bn
6 SNPS Synopsys Inc 86.06 Bn 64.60 12.20 14.29 Bn
7 NET Cloudflare, Inc. 62.78 Bn -609.27 31.18 3.50 Bn
8 FTNT Fortinet, Inc. 60.83 Bn 32.47 9.28 1.00 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.28 2.69
EV to Cash from Ops. EV/CFO 15.16 28.91
EV to Debt EV to Debt 62.38 19.83
EV to EBIT EV/EBIT 17.81 -9.95
EV to EBITDA EV/EBITDA 16.17 6.82
EV to Free Cash Flow [EV/FCF] EV/FCF 15.88 26.09
EV to Market Cap EV to Market Cap 0.92 0.36
EV to Revenue EV/Rev 4.66 -9.34
Price to Book Value [P/B] P/B 4.34 3.88
Price to Earnings [P/E] P/E 22.52 -10.66
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -0.30
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.71
Dividend per Basic Share Div per Share (Qtr) 0.00 0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 1.68
Interest Coverage Interest Coverage 0.00 -14.20
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -42.25 -408.01
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 25.09 226.39
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 22.16 25.27
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 11.42 47.48
EBIT Growth (1y) % EBIT 1y % (Qtr) 16.23 20.13
EBT Growth (1y) % EBT 1y % (Qtr) 16.23 14.16
EPS Growth (1y) % EPS 1y % (Qtr) 23.94 67.50
FCF Growth (1y) % FCF 1y % (Qtr) 18.95 296.60
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 11.32 46.75
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.49 0.67
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.01
Cash Ratio Cash Ratio (Qtr) 0.83 1.22
Current Ratio Curr Ratio (Qtr) 1.56 2.59
Debt to Equity Ratio Debt/Equity (Qtr) 0.06 -0.96
Interest Cover Ratio Interest Cover Ratio 0.00 -14.20
Times Interest Earned Times Interest Earned 0.00 -14.20
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 30.20 -548.16
EBIT Margin % EBIT Margin % (Qtr) 26.18 -199.84
EBT Margin % EBT Margin % (Qtr) 26.18 -607.20
Gross Margin % Gross Margin % (Qtr) 81.40 51.88
Net Profit Margin % Net Margin % (Qtr) 22.40 -610.00