After an earnings disappointment, Citrix is trading back down to $28 and change, which is where I recommended purchase at the beginning of the year. Given that the company has the ability to grow sales and earnings at a low to mid double digit rate, the current valuation looks very attractive.
Estimates for calendar year 2007 stand at about $1.50 per share. The company's balance sheet is pristine, with no debt and $736 million in cash, which equates to $4 per share in net cash. So, investors buying CTXS at $28 are getting a stock with an enterprise value of only $24 and $1.50 in earnings power. This equates to a 16 forward P/E multiple, which in my view is too pessimistic given Citrix's growth outlook.
I would expect Citrix shares to head well into the thirties again during 2007, and as a result, suggest investors reenter the stock. Evidently, CTXS management agrees the shares are undervalued, as they just announced a new $300 million share repurchase authorization.
Full Disclosure: I own shares of Citrix Systems (CTXS), as do Peridot clients.
CTXS 1-yr chart: