Ubiquiti Inc. (NYSE: UI)

Sector: Technology Industry: Communication Equipment CIK: 0001511737
Market Cap 33.47 Bn
P/B 40.40
P/E 42.27
P/S 12.14
ROIC (Qtr) 76.64
Div Yield % 0.61
Rev 1y % (Qtr) 33.33
Total Debt (Qtr) 167.15 Mn
Debt/Equity (Qtr) 0.20

About

Ubiquiti Inc., often referred to as UI, operates in the technology industry, specifically focusing on the development and manufacturing of networking equipment and solutions. The company, established in 2005 by Robert Pera, has its headquarters in New York, New York. UI's mission is to provide high-capacity distributed Internet access and unified information technology management for a wide array of applications, from small businesses to large enterprises. The company's main business activities encompass the design, development, and manufacturing...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 604.81M provides robust 3.62x coverage of total debt 167.15M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 604.81M provides exceptional 26.03x coverage of interest expenses 23.23M, showing strong debt service capability.
  • Strong tangible asset base of 1.49B provides 8.92x coverage of total debt 167.15M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 604.81M provides strong 81.78x coverage of stock compensation 7.40M, indicating sustainable incentive practices.
  • Robust free cash flow of 589.67M exceeds capital expenditure of 15.14M by 38.95x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 604.81M barely covers its investment activities of (15.14M), with a coverage ratio of -39.95, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 177.19M against inventory of 680.71M, the 0.26 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 604.81M provides thin coverage of dividend payments of (157.27M) with a -3.85 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (15.14M) provide weak support for R&D spending of 180.22M, which is -0.08x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Free cash flow of 589.67M represents just -1.41x of debt issuance (418.75M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

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 22.55 2.22
EV to Cash from Ops. EV/CFO 55.57 10.78
EV to Debt EV to Debt 201.07 25.00
EV to EBIT EV/EBIT 36.18 32.18
EV to EBITDA EV/EBITDA 35.39 10.60
EV to Free Cash Flow [EV/FCF] EV/FCF 56.99 -3.32
EV to Market Cap EV to Market Cap 1.00 1.17
EV to Revenue EV/Rev 12.19 27.87
Price to Book Value [P/B] P/B 40.40 5.35
Price to Earnings [P/E] P/E 42.27 2.67
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 5.03 0.91
Dividend Payout Ratio % Div Payout % (Qtr) 19.90 -25.01
Dividend per Basic Share Div per Share (Qtr) 2.60 0.22
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 26.67 4.46
Interest Coverage Int. cover (Qtr) 39.98 -12.93
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -31.04 -73.93
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 7.28 463.06
Dividend Growth (1y) % Div 1y % (Qtr) 8.33 1.39
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 83.26 204.95
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 69.62 -1.04
EBIT Growth (1y) % EBIT 1y % (Qtr) 72.03 238.24
EBT Growth (1y) % EBT 1y % (Qtr) 90.49 173.82
EPS Growth (1y) % EPS 1y % (Qtr) 102.63 8.68
FCF Growth (1y) % FCF 1y % (Qtr) -15.27 20.80
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 55.33 41.66
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.85 0.76
Cash Payout Ratio Cash Payout (Qtr) 0.25 0.03
Cash Ratio Cash Ratio (Qtr) 0.31 1.20
Current Ratio Curr Ratio (Qtr) 2.09 2.69
Debt to Equity Ratio Debt/Equity (Qtr) 0.20 0.43
Interest Cover Ratio Int Coverage (Qtr) 39.98 -12.93
Times Interest Earned Times Interest Earned (Qtr) 39.98 -12.93
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 34.40 -40.66
EBIT Margin % EBIT Margin % (Qtr) 33.69 -52.32
EBT Margin % EBT Margin % (Qtr) 32.85 -59.46
Gross Margin % Gross Margin % (Qtr) 44.40 39.35
Net Profit Margin % Net Margin % (Qtr) 28.70 -60.72