Maverick increased its existing position in Citrix Systems (CTXS), a leading application software company at an average price of $64.5. Citrix has great profitability metrics, an interesting investment thesis and an attractive valuation.
Citrix Systems, Inc. designs, develops, and markets technology solutions to deliver IT services on-demand. Citrix offers successful cloud services such as NetScaler, GoTo services and ShareFile which continue to lead the market and gain share. This company has a strong profitability profile:
- EBITDA growth of 17.8%
- EPS growth of 18%
- Net margin of 16%
- Strong FCF
The investment thesis for CTXS is simple: the business has been performing strongly but in the mid part of 2012 CTXS growth rates dipped down pretty dramatically because several non-skilled customers hold off purchases of highly value-added Citrix products due to economic volatility. Those customers that stopped buying Citrix products last year are finally coming back which is starting to be reflected in Citrix’s earnings reports.
In fact, last quarter Citrix reported Q4 earnings of $0.90 per share, $0.06 better than the Capital IQ Consensus Estimate of $0.84 while revenues rose a strong 19.5% year/year to $740 millionn vs the $705.89 million consensus. Almost every category grew at double-digit rates.
Citrix management projects FY13 EPS of $3.12-3.15. Considering that CTXS has been trading in a P/E range between 30-40 x since the last 5 years, this EPS projection could translate in a target price of $95.