Netscout Systems Inc (NASDAQ: NTCT)

Sector: Technology Industry: Software - Infrastructure CIK: 0001078075
P/B 1.24
P/E 21.83
P/S 2.27
Market Cap 1.96 Bn
ROIC (Qtr) 5.52
Div Yield % 0.00
Rev 1y % (Qtr) 14.60
Total Debt (Qtr) 43.55 Mn
Debt/Equity (Qtr) 0.03

About

NetScout Systems, Inc., commonly recognized by its ticker symbol NTCT, operates in the service assurance and cybersecurity solutions industry. The company has a rich history dating back to 1984, where it has established itself as a pioneer in using IP-based network traffic to aid organizations in managing and optimizing the delivery of services and applications over their networks. The company's main business activities revolve around providing visibility and protection for enterprise and service provider customers across various markets, including...

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Analysis

Pros

  • Strong operating cash flow of 263.18M provides robust 6.04x coverage of total debt 43.55M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 483.38M provide 48.29x coverage of short-term debt 10.01M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 868.28M provides 19.94x coverage of total debt 43.55M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 263.18M provides exceptional 61.92x coverage of interest expenses 4.25M, showing strong debt service capability.
  • Robust free cash flow of 255.81M exceeds capital expenditure of 7.37M by 34.72x, indicating strong organic growth funding capability.

Cons

  • Operating cash flow of 263.18M barely covers its investment activities of (20.41M), with a coverage ratio of -12.89, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (20.41M) provide weak support for R&D spending of 154.55M, which is -0.13x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 263.18M provides insufficient coverage of deferred revenue obligations of 428.08M, which is 0.61x, raising concerns about future service delivery capabilities.
  • High receivables of 130.16M relative to inventory of 12.38M (10.51 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • The company's operating cash flow of 263.18M shows concerning coverage of stock compensation expenses of 62.22M, with a 4.23 ratio indicating potential earnings quality issues.

Peer Comparison

Companies in the Software - Infrastructure
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MSFT Microsoft Corp 3,542.10 Bn 33.76 12.06 60.56 Bn
2 ORCL Oracle Corp 533.93 Bn 34.61 8.75 124.39 Bn
3 PLTR Palantir Technologies Inc. 437.56 Bn 399.47 112.31 0.24 Bn
4 PANW Palo Alto Networks Inc 125.16 Bn 112.03 13.10 0.35 Bn
5 CRWD CrowdStrike Holdings, Inc. 120.85 Bn -384.67 26.47 0.82 Bn
6 SNPS Synopsys Inc 71.69 Bn 35.89 11.14 15.14 Bn
7 NET Cloudflare, Inc. 67.84 Bn -658.43 33.70 3.50 Bn
8 FTNT Fortinet, Inc. 63.33 Bn 33.80 9.66 1.00 Bn

Industry Comparisons

Current Valuation

Metric Value Industry Percentile
EV to Assets 0.69 2.56
EV to Cash from Ops. 5.73 38.32
EV to Debt 34.62 -11.37
EV to EBIT 13.91 -12.79
EV to EBITDA 9.01 7.72
EV to Free Cash Flow [EV/FCF] 5.89 24.22
EV to Market Cap 0.77 0.58
EV to Revenue 1.75 -35.00
Price to Book Value [P/B] 1.24 3.74
Price to Earnings [P/E] 21.83 -18.61

Dividend Metrics

Metric Value Industry Percentile
Dividend Coverage Ratio 0.00 -0.30
Dividend Payout Ratio % 0.00 2.69
Dividend per Basic Share 0.00 0.10
FCF Dividend Payout Ratio % 0.00 1.67
Interest Coverage 25.50 -13.15

Growth Metrics

Metric Value Industry Percentile
Capex Growth (1y) % -46.95 -404.11
Cash and Equivalents Growth (1y) % 33.03 226.02
Dividend Growth (1y) % 0.00 -0.27
EBIAT Growth (1y) % 115.77 31.15
EBITDA Growth (1y) % 130.35 49.02
EBIT Growth (1y) % 118.07 25.85
EBT Growth (1y) % 117.13 17.82
EPS Growth (1y) % 115.00 70.69
FCF Growth (1y) % 86.41 295.45
Gross Profit Growth (1y) % 12.63 49.96

Liquidity Ratios

Metric Value Industry Percentile
Asset Utilization Ratio 0.40 0.68
Cash Payout Ratio 0.00 0.02
Cash Ratio 1.28 1.21
Current Ratio 1.88 2.57
Debt to Equity Ratio 0.03 -0.93
Interest Cover Ratio 25.50 -13.15
Times Interest Earned 25.50 -13.15

Profitability

Metric Value Industry Percentile
EBITDA Margin % 19.50 -544.82
EBIT Margin % 12.56 -197.78
EBT Margin % 12.07 -602.74
Gross Margin % 79.20 52.06
Net Profit Margin % 10.40 -605.52