Mitel Networks Corp. – Value Analysis (NASDAQ:MITL) : December 22, 2016

Capitalcube gives Mitel Networks Corp. a score of 38.

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 38 and has a relative valuation of UNDERVALUED.

Fundamental Score

Access our research and ratings on Mitel Networks Corp.

Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • Mitel Networks Corporation trades at a lower Price/Book multiple (1.44) than its peer median (2.44).
  • MITL-US‘s EBITDA-based price multiple implies slower growth than its peers. The market also seems to expect the company’s currently median rates of EBITDA-based return to decline.
  • MITL-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • 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.
  • While MITL-US‘s revenue growth in recent years has been above the peer median, the stock’s Price/EBITDA ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company is likely overinvesting in a business with only median returns.
  • MITL-US seems too levered to raise additional debt.

Access our research and ratings on Mitel Networks Corp.

Leverage & Liquidity

MITL-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 41.65% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 29.60%), and relatively tight interest coverage level of 1.20x, MITL-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • 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 maintained its Limited Flexibility profile from the recent year-end.

  • MITL-US‘s interest coverage is downward trending and is below (but within one standard deviation of) its five-year average interest coverage of 2.04x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (1.20x) and the peer median (1.20x).
  • MITL-US‘s debt-EV is less than (but within one standard deviation of) its five-year average debt-EV of 45.64%.
  • While its debt-EV decreased to 41.65% from 43.56% (in 2015), its peer median increased during this period to 29.60% from 24.60%.
  • Relative to peers, debt-EV fell 6.91 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 1.48 -19.73 999
Microsoft Corporation 19.56 2.69 14.18 56.07
Cisco Systems, Inc. 29.6 3.58 18.35 43.1
Inventergy Global Inc 49.33 0.07 -1.96 -54.26
Mitel Networks Corporation 41.65 1.46 1.2 17.74
Peer Median 29.6 1.48 1.2 43.1
Best In Class 19.56 3.58 18.35 999

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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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