Lull Ahead Of Major Investment Cycle Provides Low-Risk Opportunity For EXFO
John Leonard, CFA • Thu, Sep. 11
- EBITDA is likely at trough levels due to the impact of lower network operator spending over the past two years.
- However the intermediate-term outlook remains bullish; there are already signs of a recovery as evident by the improving book-to-bill ratio.
- EXFO is highly levered to this recovery with its high market share, increasing exposure to the strong wireless market and new products that benefit from the trend towards network virtualization.
- The 15% EBITDA margin target to be reached over the intermediate term is less aggressive in light of the considerable progress already made (11.5% margin in the mrq).
- The downside is limited by the high insider ownership, improving cash flow and strong balance sheet (no debt and cash that equals 20% of the market cap).