After a modest 11% growth since March 23, Citrix Systems stock (NASDAQ: CTXS) looks fully valued based on its historic Price to Sales (P/S) multiples. Citrix Systems, a cloud-based enterprise software provider, has seen its stock rally from $122 to $135 off the recent bottom compared to the S&P which moved around 50%. The stock is lagging the overall markets by a margin, as investors are cautious about the stock sell-off by company insiders over the recent months. Notably, the technology stocks have also seen some negative movement since September 2nd due to a stint of profit-taking after a strong run – CTXS’s stock is down 9% in the past one month. Despite this, the stock is still up 22% from levels seen at the end of 2019.
Citrix Systems’ stock has surpassed the level it was at before the drop in February due to the coronavirus outbreak becoming a pandemic. This seems to make it fully valued as, in reality, demand and revenues will likely be lower this year than last year.
Some of the rise over the last 2 years could be attributed to roughly 7% growth seen in Citrix Systems’ revenues from FY 2017 to FY 2019. Its net income increased from -$20.8 million in FY 2017 to $681.8 million in FY 2019, mainly due to the income tax benefit received in 2019 related to the Swiss tax reform.
While the company has seen modest revenue growth over FY 2017-19, its P/S multiple has remained almost constant. We believe the stock is unlikely to see a significant upside after the recent rally and the potential