If virtualization is the new hotness, then VMware
What Fools say:
Here's how VMware's CAPS score measures up to some of its peers and competitors:
Market Cap (millions) |
Trailing P/E Ratio |
CAPS Rating |
|
---|---|---|---|
Microsoft |
$313,970 |
22.0 |
*** |
Oracle |
$105,870 |
22.6 |
**** |
VMware |
$30,870 |
161.2 |
*** |
Sun Microsystems |
$13,660 |
24.1 |
*** |
Citrix Systems |
$6,450 |
30.8 |
**** |
One P/E ratio in that gang sticks out like a sore thumb, and you can probably guess what our CAPS players are saying about our protagonist today. Catcalls of "completely overpriced," "it's gotten ahead of itself," and various price targets far below the current share price follow the curious VMware investor down Bear Street.
On Bull Boulevard, it's a different tune altogether. Those players, who outnumber the bears 10-to-1, see incredible promise in the virtual server market, where the company is a first-mover and share leader. There is hardly any discussion of valuation on that side of the tracks.
What management says:
In return for a $150 million investment in VMware, pre-IPO parent EMC
What management does:
Faithful readers of our Foolish Forecasts will note that this numerical rundown is shorter than usual. But VMware simply doesn't have any more data to work with, so I'll settle for an abbreviated look until Father Time catches up with the trailing-12-month comparisons.
Annnnnd ... what we can tell from this limited data set is that VMware is solidly profitable, and generates plenty of free cash in every quarter.
9/30/2006 |
3/31/2007 |
6/30/2007 |
9/30/2007 |
|
---|---|---|---|---|
Gross |
83.2% |
82.6% |
82.8% |
83.5% |
Operating |
24.2% |
16.8% |
16.2% |
17.1% |
Net |
17.3% |
12.8% |
12.9% |
15.0% |
FCF/Revenue |
56.2% |
27.2% |
23.8% |
24.4% |
One Fool says:
There is no doubt that the bears have a solid point: Even with insanely optimistic growth expectations for the next 10 years, it's hard to justify a $30 billion market cap today. This would be one of those promising stocks that I'd follow from afar until a slight stumble sends share prices plummeting, and only then would I give serious thought to investing real money here.
That said, I think this is much closer to the next Google