Harmonic Inc. (NASDAQ: HLIT)

Sector: Technology Industry: Communication Equipment CIK: 0000851310
Market Cap 1.14 Bn
P/B 2.58
P/E 23.00
P/S 1.80
ROIC (Qtr) 3.98
Div Yield % 0.00
Rev 1y % (Qtr) -27.27
Total Debt (Qtr) 146.56 Mn
Debt/Equity (Qtr) 0.33

About

Harmonic Inc., a leading global provider of broadband access solutions and video delivery software, operates under the ticker symbol HLIT. The company is based in the technology and media industry, with two main business segments: Broadband and Video. Harmonic's Broadband segment offers a software-based broadband access solution, cOS, which is designed to address space and power constraints in broadband operator facilities and significantly reduce dependence on hardware upgrade cycles. This solution helps operators efficiently and effectively deploy...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 144.21M provides robust 0.98x coverage of total debt 146.56M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 127.38M provide 8.69x coverage of short-term debt 14.66M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 516.83M provides 3.53x coverage of total debt 146.56M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 144.21M provides exceptional 22.52x coverage of interest expenses 6.40M, showing strong debt service capability.
  • Robust free cash flow of 133.46M exceeds capital expenditure of 10.75M by 12.41x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 144.21M barely covers its investment activities of (10.75M), with a coverage ratio of -13.41, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (10.75M) provide weak support for R&D spending of 121.90M, which is -0.09x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • The company's operating cash flow of 144.21M shows concerning coverage of stock compensation expenses of 31.97M, with a 4.51 ratio indicating potential earnings quality issues.
  • Free cash flow of 133.46M represents just -35.95x of debt issuance (3.71M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 144.21M is outpaced by equity issuance of (59.77M) (-2.41 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Communication Equipment
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 CSCO Cisco Systems, Inc. 306.02 Bn 29.63 5.30 28.09 Bn
2 MSI Motorola Solutions, Inc. 63.92 Bn 30.21 5.65 9.81 Bn
3 HPE Hewlett Packard Enterprise Co 35.43 Bn -600.50 1.03 22.37 Bn
4 UI Ubiquiti Inc. 33.47 Bn 42.27 12.14 0.17 Bn
5 CIEN Ciena Corp 33.16 Bn 268.82 6.95 1.58 Bn
6 LITE Lumentum Holdings Inc. 25.28 Bn 224.75 13.73 3.28 Bn
7 ASTS AST SpaceMobile, Inc. 19.88 Bn -65.43 1,072.82 0.72 Bn
8 ZBRA Zebra Technologies Corp 12.46 Bn 24.33 2.37 2.32 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.54 2.22
EV to Cash from Ops. EV/CFO 8.10 10.78
EV to Debt EV to Debt 7.97 25.00
EV to EBIT EV/EBIT 14.12 32.18
EV to EBITDA EV/EBITDA 13.29 10.60
EV to Free Cash Flow [EV/FCF] EV/FCF 8.75 -3.32
EV to Market Cap EV to Market Cap 1.02 1.17
EV to Revenue EV/Rev 1.84 27.87
Price to Book Value [P/B] P/B 2.58 5.35
Price to Earnings [P/E] P/E 23.00 2.67
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 0.91
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 -25.01
Dividend per Basic Share Div per Share (Qtr) 0.00 0.22
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 4.46
Interest Coverage Int. cover (Qtr) 12.92 -12.93
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -12.38 -73.93
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 117.73 463.06
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 1.39
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -57.99 204.95
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 173.31 -1.04
EBIT Growth (1y) % EBIT 1y % (Qtr) 415.32 238.24
EBT Growth (1y) % EBT 1y % (Qtr) 616.75 173.82
EPS Growth (1y) % EPS 1y % (Qtr) -43.42 8.68
FCF Growth (1y) % FCF 1y % (Qtr) 1,223.08 20.80
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 9.60 41.66
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.84 0.76
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.03
Cash Ratio Cash Ratio (Qtr) 0.81 1.20
Current Ratio Curr Ratio (Qtr) 2.08 2.69
Debt to Equity Ratio Debt/Equity (Qtr) 0.33 0.43
Interest Cover Ratio Int Coverage (Qtr) 12.92 -12.93
Times Interest Earned Times Interest Earned (Qtr) 12.92 -12.93
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 14.80 -40.66
EBIT Margin % EBIT Margin % (Qtr) 13.01 -52.32
EBT Margin % EBT Margin % (Qtr) 12.00 -59.46
Gross Margin % Gross Margin % (Qtr) 55.70 39.35
Net Profit Margin % Net Margin % (Qtr) 7.80 -60.72