Corero Network Security (LON:CNS) has secured $8m of orders from both existing and new customers in the first four months of FY24E. The group reported a 17% YoY growth rate in annualised recurring revenue (ARR) last year. This level of momentum in orders not only supports our double-digit % growth forecasts, but also validates the Group’s go-to-market strategy.
We are forecasting +13% growth in revenues in FY24E to $25.3m (unchanged), With gross margins high at 90%, the drop through rate of incremental revenues to earnings means that EBITDA margins should reach double digits this year. The stock is free cash flow positive with a forecast FCF margin of 6.7% in FY24E. Net cash balances will continue to grow as a function of this free cash flow growth (+33% to $6.9m in FY24E).
The share price is only just beginning to wake up to the progress made in bringing the business model to maturity, in our view. Trading at the top of its 12 months price range, the stock’s forward rating of only 2.7x EV/Sales in FY24E continues to support our fair value assessment of 14p price/share.
New research note: https://www.equitydevelopment....
