F5 Inc. (FFIV) is a multi-cloud application security and delivery company that enables the world's leading corporations, financial institutions, service providers, and governments to develop innovative digital experiences. With the world accelerating toward a much more technologically oriented future, demand for FFIV's comprehensive software platforms has been soaring since last year. FFIV is headquartered in Seattle, Wash.
The company has leveraged its growth to gain a larger market share through strategic expansions and acquisitions. For instance, it recently acquired Threat Stack, a leading cloud security company.
The stock has gained 7.7% in price over the past year and 12% over the past nine months. In addition, closing yesterday's trading session at $209.18, it is currently trading 16% below its 52-weeks high of $249.
Click here to checkout our Cybersecurity Industry Report for 2022
Here is what could shape FFIV's performance in the near term:
Strategic Acquisition
In October, FFIV acquired Threat Stack, a market leader in cloud security and workload protection. The integration of Threat Stack's cloud security capabilities into FFIV's application and API protection solutions will improve visibility across application infrastructure and workloads, providing clients with more actionable security information.
Robust Financials
During its first fiscal quarter, ended Dec. 31, 2021, FFIV's net revenue increased 10% year-over-year to $687.10 million. Its gross profit increased 8.3% year-over-year to $552.02 million. And the company's net income grew 6.7% from its year-ago value to $9.56 million, while its EPS grew 7.1% from the prior-year quarter to $1.51.
Strong Profitability
FFIV's 12.7% trailing-12-months net income margin is 91% higher than the 6.6% industry average. Also, its ROC, gross profit margin and ROA are 90.6%, 62.1%, and 69% higher than the respective industry averages. Furthermore, its $598.2 billion in cash from operations is 411.5% higher than the $116.95 million industry average.
Impressive Growth Prospects
The Street expects FFIV's revenues and EPS to rise 9.5% and 19.5%, respectively, year-over-year to $3.02 billion and $12.71 in fiscal 2023. In addition, FFIV's EPS is expected to rise at an 8.7% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Upside
Among the 15 Wall Street analysts that rated FFIV, 11 rated it Buy, and three rated it Hold. The 12-month median price target of $247.47 indicates a 19.3% potential upside. The price targets range from a low of $170.00 to a high of $307.00.
POWR Ratings Reflect Solid Prospects
FFIV has an overall A grade, which equates to a Strong Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. FFIV has an A grade for Quality and a B for Growth. FFIV's solid earnings and revenue growth potential are consistent with its Quality and Growth grade.
Among the 59 stocks in the Software – Business industry, FFIV is ranked #1.
Beyond what I stated above, we have graded FFIV for Sentiment, Stability, Value, and Momentum. Get all FFIV ratings here.
Bottom Line
With strong demand for software solutions globally, FFIV has exhibited robust financial performance in its last reported quarter. In addition, based on its strategic acquisition of Threat Stack, the company should exhibit solid growth in the coming months. So, considering favorable analysts' sentiments and the company's fundamental strength, we think the stock could be a great bet now.
How Does F5 Inc. (FFIV) Stack Up Against its Peers?
FFIV has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other stocks within the Software - Business industry with B (Buy) ratings: Agilysys Inc. (AGYS), VMware Inc. (VMW), and CSG Systems International Inc. (CSGS).
Click here to check out our Software Industry Report for 2022
FFIV shares were unchanged in premarket trading Thursday. Year-to-date, FFIV has declined -14.52%, versus a -4.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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