Here’s Why NetApp Stock Has Underperformed The Market Since 2018

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NetApp (NASDAQ: NTAP) stock price rose 39% from around $60 at 2018 end, to $83 currently, due to favorable changes in its P/S multiple. This comes as a surprise, since the company has witnessed a drop in revenue over this period. However, revenue per share has risen, helped by a 17% decrease in the outstanding share count since 2018.

In our interactive dashboard, Why NetApp Stock Moved: NTAP Stock Has Gained 39% Since 2018, we break down the factors behind this move.

(A) NTAP’s Total Revenue has dropped 6.2% from $5.9 billion in 2018 to $5.6 billion on an LTM basis

  • NTAP’s total revenue first rose from $5.9 billion in FY ’18 to $6.1 billion in FY ’19, before dropping as low as $5.4 billion in FY ’20.
  • Sales have since recovered, and currently stand at $5.6 billion on an LTM basis, still 6.2% lower than the FY ’18 level (NetApp’s fiscal year ends in April).
  • This drop in sales has largely been due to a drop in product sales, with services revenue, in fact, rising over this period.
  • For details about NTAP revenues and comparison to peers, see NetApp (NTAP) Revenue Comparison
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(B) Revenue per share (RPS) increased 13% from $21.94 in 2018 to $24.89 currently

  • NTAP revenue dropped from $5.9 billion in 2018 to $5.6 billion currently, but the outstanding share count dropped from 269.8 million in 2018 to 223 million currently, a drop of 17%.
  • Due to this, RPS has risen from $21.94 in FY ’18 to $24.89 currently.

(C) Price-To-Sales (P/S) multiple for NTAP below 2.5x till late 2019 but has since risen to 3.3x currently.

  • Despite NTAP’s inconsistent performance since 2018-end, its P/S multiple has risen since 2018 from 2.2x, to as high as 3.5x at 2021 end.
  • However, amidst current geopolitical tensions dragging down the broader markets, the P/S multiple has pulled back and currently stands at around 3.3x.
  • For additional details about the company’s historical returns and comparison to peers, see NetApp (NTAP) Stock Return.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

 Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NTAP Return -2% -12% 130%
 S&P 500 Return 0% -5% 102%
 Trefis MS Portfolio Return 1% -7% 267%

[1] Month-to-date and year-to-date as of 4/1/2022
[2] Cumulative total returns since the end of 2016

 

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