In this article, let's take a look at Symantec Corporation (SYMC, Financial), a $17.88 billion market cap company that provides software solutions that enable consumers and enterprises to both protect their network infrastructure from potential threats and store their data.
Revenues and EPS
Looking at profitability, revenues declined by 1.23%, but earnings per share increased in the most recent quarter compared to the same quarter a year ago ($0.35 vs $0.34). During the past fiscal year, the company increased its bottom line. It earned $1.27 versus $1.06 in the prior year. This year, Wall Street expects an improvement in earnings ($1.90 versus $1.27).
Net Income
The net income increased by 1.2% when compared to the same quarter one year prior (from $241 million to $244 million).
Margins
The gross profit margin is considered very high, at 88.00%. It has increased from the same quarter the previous year. But the net profit margin is ranked higher than 91% of the 2055 Companies in the Software - Application industry.
Profitability
Finally, let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
| Ticker | Company | ROE (%) |
| SYMC | Symantec | 16.93 |
| N | NetSuite Inc | -44.08 |
| MSFT | Microsoft Corp | 24.61 |
| ORCL | Oracle Corporation | 24.22 |
| Â | Industry Median | 7.1 |
The company has a current ROE of 16.93% which is higher than the industry median and the one exhibit by NetSuite (N, Financial).In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. So for investors looking those levels or more, Microsoft (MSFT, Financial) and Oracle (ORCL, Financial) could be the options. It is very important to understand this metric before investing, and it is important to look at the trend in ROE over time.
Relative Valuation
In terms of valuation, the stock sells at a trailing P/E of 18.5x, trading at a discount compared to an average of 54.3x for the industry. To use another metric, its price-to-book ratio of 3.0x indicates a discount versus the industry average of 3.33x while the price-to-sales ratio of 2.7x is above the industry average of 2.68x.
As we can see in the next chart, the stock price has an upward trend in the five-year period. If you had invested $10,000 five years ago, today you could have $15,102, which represents a 8.6% compound annual growth rate (CAGR).
Final comment
The company has a good ROE, as well as good valuation levels. Further, its earning´s growth, good profit margins and the increase in stock price during the past year; make me feel bullish on this stock.
Hedge fund gurus like Chuck Royce (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), David Dreman (Trades, Portfolio), Richard Snow (Trades, Portfolio), John Buckingham (Trades, Portfolio) and Martin Whitman (Trades, Portfolio) added this stock to their portfolios in the third quarter of 2014, as well as Third Avenue Management (Trades, Portfolio).
Disclosure: Omar Venerio holds no position in any stocks mentioned
