NetScout Systems, Inc. (NTCT), a leading provider of enterprise performance management, carrier service assurance, cybersecurity, and DDoS attack protection solutions, reported solid financial results for the second quarter of the fiscal year 2025. The company’s revenue of $191.11 million surpassed the consensus estimate of $188 million. Also, its EPS of $0.47 beat the analysts’ expectation of $0.45.
NetScout is actively integrating the latest digital technologies like AI and ML into its systems to advance its services and cater to the evolving customer demand. Also, the company recently introduced multiple advancements targeting cybersecurity and service assurance capabilities.
During the second quarter, the company introduced Omnis AI Insights solution to deliver precise, actionable network telemetry data to feed customer AI initiatives and enable critical outcomes. Also, it introduced enhancements to its nGenius Enterprise Performance Management solution.
Furthermore, in late September, NTCT updated its advanced, scalable deep packet inspection-based Omnis Cyber Intelligence Network Detection and Response (NDR) platform to enable earlier detection of advanced threats.
With the evolution of technology, incidents of cyberattacks, vulnerabilities related to data and software, malware, and unauthorized access to networks are increasing. Such ongoing AI-enabled DDoS threats, a critical need for the protection of IT infrastructure, and advancing cybersecurity & infrastructure security needs are opening new avenues for NTCT and will offer wide expansion opportunities in the future.
The company reaffirmed its fiscal year 2025 outlook. It expects revenue in the range of $800 million to $830 million. The company projects non-GAAP net income between $153 million and $168 million and $2.10 to $2.30 per share.
On the stock performance front as well, NTCT has maintained its strong pace. Shares of NTCT have gained 15% over the past six months to close its last trading session at $21.68. Also, the stock has surged 3.4% over the past year, reflecting its strong performance.
Let’s look at factors that could influence NTCT’s performance in the upcoming months.
Positive Recent Developments
On December 19, NTCT updated its industry-leading Arbor Edge Defense (AED) and Arbor Enterprise Manager (AEM) products with the introduction of artificial intelligence (AI) and machine learning (ML) technology to combat AI-enabled DDoS threats and protect critical IT infrastructure. The enhanced capabilities can identify and mitigate dynamically changing, AI-enabled DDoS attacks.
On November 13, NTCT expanded its partnership with Arelion, a global connectivity solution provider. The extended partnership aims to strengthen DDoS attack mitigation capabilities. The continued collaboration reflects the companies’ ongoing investment in the best network security solutions to protect the technology ecosystem and will enhance NTCT’s position in the cybersecurity market.
Also, on September 24, the company enhanced its nGenius Enterprise Performance Management solution, which includes a new notification center to streamline and automate alerts and contextual workflows to identify and resolve problems faster. The nGeniusONE notification center and updates for critical vertical market infrastructure are capable of delivering better service quality.
Solid Financials
For the second quarter that ended September 30, 2024, NTCT reported total revenue of $191.11 million, of which its product revenue grew 0.6% from the year-ago value to $81.03 million. Its non-GAAP gross profit was $152.25 million, and non-GAAP income from operations was $44.07 million for the quarter.
Also, the company’s non-GAAP net income was $33.56 million and $0.47 per share for the period, respectively. Further, NTCT’s cash, cash equivalents, marketable securities and investments, and total assets stood at $400.87 million and $2.07 billion as of September 30, 2024.
Favorable Analyst Estimates
Analysts expect NTCT’s revenue for the fourth quarter (ending March 2025) to come in at $222 million, indicating an increase of 9.1% year-over-year. The consensus EPS estimate of $0.69 for the same period reflects a 25.5% year-over-year improvement. Further, the company has surpassed the consensus EPS estimate in all of the trailing four quarters.
For the fiscal year 2026, the company’s revenue and EPS are anticipated to grow 1.8% and 2.1% year-over-year to $827.93 million and $2.21, respectively.
High Profitability
NTCT’s trailing-12-month gross profit margin of 77.08% is 52.3% higher than the 50.62% industry average. Its trailing-12-month EBITDA margin of 13.63% is 29.8% higher than the industry average of 10.50%. Likewise, the stock’s trailing-12-month levered FCF margin of 21.22% is significantly higher than the industry average of 87.92%.
Lower Valuation
In terms of forward non-GAAP P/E, NTCT is currently trading at 10.04x, 60.7% lower than the industry average of 25.54x. The stock’s forward EV/Sales and EV/EBITDA of 1.57x and 7.60x are considerably lower than the industry average of 3.38x and 15.59x, respectively.
Additionally, the stock’s forward Price/Sales and Price/Cash Flow of 1.91x and 15.27x are 43.1% and 28.8% lower than the industry averages of 3.36x and 21.45x, respectively.
POWR Ratings Reflect Optimism
NTCT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NTCT has a B grade for Value and Quality, consistent with its lower valuation and higher-than-industry profitability.
Also, the stock has a B grade for Sentiment, which is in sync with its optimistic analysts’ estimates.
NTCT is ranked #4 among the 78 stocks in the Technology - Services industry.
Beyond what I have stated above, we have also given NTCT grades for Momentum, Growth, and Stability. Get access to all the NTCT ratings here.
Bottom Line
NTCT reported solid financial results in the last reported quarter. The company is continuously expanding its operations with new enhancements and updates. NTCT is also introducing advanced solutions in collaboration with other leading organizations to keep its customers and their systems safe.
Further, the company’s long-term prospects are driven by its offering expansion, enhanced capability, and strong financial performance. Given such trends of NTCT, investing in this stock now seems prudent.
How Does NetScout Systems, Inc. (NTCT) Stack Up Against Its Peers?
While NTCT has an overall POWR Rating of A, investors could also check out these other stocks within the Technology - Services industry with A (Strong Buy) or B (Buy) ratings: Teradata Corporation (TDC), Leidos Holdings Inc. (LDOS), and N-able Inc. (NABL).
For exploring more A and B-rated technology stocks, click here.
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NTCT shares were trading at $21.83 per share on Monday afternoon, up $0.15 (+0.69%). Year-to-date, NTCT has gained 0.78%, versus a 1.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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