Over the past six months, NetApp’s stock price fell to $100.57. Shareholders have lost 15.8% of their capital, which is disappointing considering the S&P 500 has climbed by 5.1%. This might have investors contemplating their next move.
Following the pullback, is this a buying opportunity for NTAP? Find out in our full research report, it’s free.
Why Does NetApp Spark Debate?
Founded in 1992 as a pioneer in networked storage technology, NetApp (NASDAQ: NTAP) provides data storage and management solutions that help organizations store, protect, and optimize their data across on-premises data centers and public clouds.
Two Things to Like:
1. Billings Growth Boosts Cash On Hand
Billings is a non-GAAP metric that sheds light on NetApp’s demand characteristics. This metric is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period - different from reported revenue, which must be recognized in pieces over the length of a contract.
NetApp’s billings punched in at $1.89 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 7.6%. This performance was solid, indicating robust customer demand. The cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
NetApp has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 19.4% over the last five years.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, NetApp’s 3.7% annualized revenue growth over the last five years was tepid. This wasn’t a great result compared to the rest of the business services sector, but there are still things to like about NetApp.
Final Judgment
NetApp’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 11.8× forward P/E (or $100.57 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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