Managing Director Stephen Goddard of The London Company of Virginia says NetApp Inc. (NTAP) is trading at less than six times EBITDA and is holding an abundance of cash, nearly a third of its market cap, on the balance sheet.
“While they haven’t grown materially in recent years, they have relatively stable cash flow. The switching costs are high, allowing a stable client base,” Goddard said.
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Goddard believes NetApp has the potential to create value by returning capital to shareholders via more aggressive buybacks.
“This is much more about the opportunity on the balance sheet than speculation on future growth prospects. We view it far easier to analyze the balance sheet opportunities rather than trying to speculate on growth projections,” Goddard said.
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