Calix (CALX): A Significantly Undervalued Gem in the Software Industry
Calix Inc (NYSE:CALX) experienced a daily gain of 4.82%, despite a 3-month loss of -14.84%. Its Earnings Per Share (EPS) stands at 0.63. But, is the stock significantly undervalued? This article aims to explore this question and provide a comprehensive valuation analysis of Calix. We encourage you to read on for an insightful financial exploration.
Company Introduction
Calix Inc develops, markets, and sells Calix cloud, systems, and software platforms to enable service providers of all types and sizes to innovate and transform. The company's customers utilize the real-time data and insights from Calix platforms to simplify their business and deliver experiences that excite their subscribers. With the majority of its revenue derived in the United States, Calix's current stock price stands at $45.43, significantly lower than its GF Value of $65.07.
Understanding GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value that the stock should ideally be traded at.
Calix (NYSE:CALX) is estimated to be significantly undervalued according to our GF Value. With its current price of $45.43 per share, Calix's long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it is essential to carefully review a company's financial strength before deciding to buy shares. Calix has a cash-to-debt ratio of 19.71, which ranks better than 72.19% of 2729 companies in the Software industry. Based on this, GuruFocus ranks Calix's financial strength as 8 out of 10, suggesting a strong balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Calix has been profitable 3 years over the past 10 years. During the past 12 months, the company had revenues of $991.90 million and Earnings Per Share (EPS) of $0.63. Its operating margin of 5.53% is better than 57.39% of 2760 companies in the Software industry. Overall, GuruFocus ranks Calix's profitability as poor.
Growth is one of the most important factors in the valuation of a company. Calix's 3-year average revenue growth rate is better than 70.22% of 2394 companies in the Software industry. However, Calix's 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of 1988 companies in the Software industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Over the past 12 months, Calix's ROIC was 7.42, while its WACC came in at 12.07.
Conclusion
In conclusion, the stock of Calix (NYSE:CALX) is estimated to be significantly undervalued. The company's financial condition is strong, but its profitability is poor. Its growth ranks worse than 0% of 1988 companies in the Software industry. To learn more about Calix stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
