F5 Networks Stock Has Failed To Outperform the S&P Despite Steady Revenue Growth

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FFIV: F5 Networks logo
FFIV
F5 Networks

F5 Inc. (NASDAQ: FFIV) stock price rose just 20% from $131 at 2017 end to around $157 currently, primarily due to favorable changes in its sales. During this period, the company, a networking services and security provider, witnessed a decent 28% rise in revenues along with a drop in its outstanding share count, but its P/S multiple has dropped over the same period. Additionally, over this period, the S&P 500 returned a little under 50%, meaning that FFIV stock underperformed the broader markets since 2017.

In our interactive dashboard, Why F5 Networks Stock Moved: FFIV Stock Has Gained 19% Since 2017, we break down the factors behind this move.

(A) FFIV’s Total Revenue has grown 28% from $2.1 billion in FY 2017 to $2.7 billion on an LTM basis

  • FFIV’s total revenue increased consistently from $2.1 billion in FY ’17 to $2.6 billion in FY ’21, and currently stands at around $2.7 billion on an LTM basis (FFIV’s fiscal year ends in September).
  • The sales growth has been consistent over these years and has been driven evenly by a growth in both services and products revenues, due to rising demand for the company’s services and entry into new markets.
  • As of FY ’21, services sales made up around 52% of the company’s total revenue, with sales from products making up the remaining 48%.
  • For details about FFIV EBITDA and comparison to peers, see F5 Networks (FFIV) EBITDA Comparison
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(B) Revenue per share (RPS) rose 37% from $32.59 in FY 2017 to around $44.51 currently

  • F5’s revenue rose from $2.1 billion in 2017 to around $2.7 billion currently, while the outstanding share count dropped from 64.1 million in 2017 to 60.2 million currently.
  • Due to this, RPS has risen from $32.59 in FY ’17 to $44.51 currently.

(C) Price-To-Sales (P/S) multiple for FFIV rose from 3.8x in 2017 to 5.7x by 2021 end but stands even lower than its 2017 level at 3.5x currently

  • F5’s P/S multiple rose to around 5.7x by late 2021, on the back of rising investor expectations surrounding increased networking products and services demand.
  • However, due to the ongoing geopolitical tensions and increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back strongly, currently standing at around 3.5x.
  • Due to this, F5 Networks’ stock has failed to outperform the S&P 500, while actually witnessing steady sales growth over the comparison period.
  • For additional details about the company’s stock returns and comparison to peers, see F5 Networks (FFIV) Stock Return Comparison.

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 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 FFIV Return 0% -36% 9%
 S&P 500 Return 0% -17% 76%
 Trefis Multi-Strategy Portfolio -2% -17% 228%

[1] Month-to-date and year-to-date as of 9/2/2022
[2] Cumulative total returns since the end of 2016

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