Mitel Networks Corp. – Value Analysis (NASDAQ:MITL) : April 26, 2017

Capitalcube gives Mitel Networks Corp. a score of 59.

Our analysis is based on comparing Mitel Networks Corp. with the following peers – ShoreTel, Inc., Microsoft Corporation, Cisco Systems, Inc. and Inventergy Global Inc (SHOR-US, MSFT-US, CSCO-US and INVT-US).

Investment Outlook

Mitel Networks Corp. has a fundamental score of 59 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It’s current Price/Book of 2.22 is about median in its peer group.
  • The market expects MITL-US to grow faster than its peers and for the company to improve its current ROE.
  • MITL-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • MITL-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • Compared with the peers chosen, MITL-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company is likely overinvesting in a business with only median returns.
  • MITL-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

MITL-US is debt-constrained.

  • With debt at a relatively high 44.53% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 29.54%), and interest coverage level of 3.61x, MITL-US seems debt-constrained.
  • Of the 4 chosen peers for the company, only 3 of the stocks have an outstanding debt balance. Companies with no debt include SHOR-US.

MITL-US has moved to a Some Capacity from a relatively high leverage profile at the prior year-end.

  • MITL-US‘s interest coverage is its highest over the last four years and compares to a low of 1x in 2013.
  • While its interest coverage increased to 3.61x from 2.49x (in 2015), its peer median decreased during this period to 3.61x from 14.30x.
  • Interest coverage rose 11.81 points relative to peers.
  • MITL-US‘s debt-EV continues to trend upward and is above (but within one standard deviation of) its four-year average debt-EV of 41.77%.
  • The increase in its debt-EV to 44.53% from 43.56% (in 2015) was also accompanied by an increase in its peer median during this period to 29.54% from 23.18%.
  • Relative to peers, debt-EV fell 5.39 percentage points.

Access the detailed analysis for Mitel Networks Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
ShoreTel, Inc. 0 1.51 -33.99 999
Microsoft Corporation 19.48 2.05 12.56 44.43
Cisco Systems, Inc. 29.54 3.67 16.53 37.14
Inventergy Global Inc 53.17 0.2 -1.37 -56.83
Mitel Networks Corporation 44.53 1.41 3.61 15.58
Peer Median 29.54 1.51 3.61 37.14
Best In Class 19.48 3.67 16.53 999

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Company Profile

Mitel Networks Corp. is a provider of business communications and collaboration software, services, and solutions. It operates through the following segments: Enterprise, Cloud, and Mobile. The Enterprise segment includes selling and supporting business communications products and services. The Cloud segment offers sells and supports products that are deployed in a cloud environment. The Mobile segment involves in selling and supporting software-based telecommunications networking solutions. The company was founded by Terence Hedley Matthews in 1972 and is headquartered in Ottawa, Canada.

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