QAD, Inc. – Value Analysis (NASDAQ:QADA) : December 4, 2017

Capitalcube gives QAD, Inc. a score of 34.

Our analysis is based on comparing QAD, Inc. with the following peers – American Software, Inc. Class A, Aspen Technology, Inc., PROS Holdings, Inc., PTC Inc., Oracle Corporation, Microsoft Corporation, Rockwell Automation, Inc., General Electric Company, Flowers Foods, Inc. and Yamazaki Baking Co., Ltd. Unsponsored ADR (AMSWA-US, AZPN-US, PRO-US, PTC-US, ORCL-US, MSFT-US, ROK-US, GE-US, FLO-US and YMZBY-US).

Investment Outlook

QAD, Inc. has a fundamental score of 34 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • It currently trades at a Price/Book ratio of (5.28).
  • QADA-US‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • QADA-US has relatively low net profit margins while its asset efficiency is relatively high.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • QADA-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • Compared with the peers chosen, QADA-US has had faster revenue growth in prior years and a current Price/EBITDA ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • QADA-US has the financial and operating capacity to borrow quickly.

Access our research and ratings on QAD, Inc.

Leverage & Liquidity

QADA-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 2.76% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 18.57%), and a well-cushioned interest coverage level of 5.56x, QADA-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 10 chosen peers for the company, only 9 of the stocks have an outstanding debt balance. Companies with no debt include AMSWA-US.

QADA-US has maintained its Quick & Able profile from the recent year-end.

  • QADA-US‘s interest coverage has increased 0.53 points from last year’s low but is still below its five-year average interest coverage of 12.46.
  • While its interest coverage increased to 5.56x from 5.02x (in 2017), its peer median decreased during this period to 7.62x from 8.57x.
  • Interest coverage rose 1.48 points relative to peers.
  • QADA-US‘s debt-EV is similar to last year’s low of 2.76%, which compares to the 2013 high of 9.47%.
  • Compared to 2017, debt-EV has remained relatively stable for both the company (2.76%) and the peer median (18.57%).

Access the detailed analysis for QAD, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
American Software, Inc. Class A 0 2.71 No interest exp 999
Aspen Technology, Inc. 3.42 0.24 51.3 132.63
PROS Holdings, Inc. 28.81 2.08 -5.92 -15.69
PTC Inc. N/A 0.98 1.2 19.45
Oracle Corporation 27.09 3.63 7.28 23.98
Microsoft Corporation 18.21 3.12 10.68 45.91
Rockwell Automation, Inc. N/A 2.06 19.65 48.69
General Electric Company 41.63 1.37 2.65 8.03
Flowers Foods, Inc. 19.06 1.28 7.62 36.25
Yamazaki Baking Co., Ltd. Unsponsored ADR 18.57 1.04 36.54 64.36
QAD Inc. Class A 2.76 1.6 5.56 86.79
Peer Median 18.57 1.6 7.62 45.91
Best In Class 2.76 3.63 No interest exp 999

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Company Profile

QAD, Inc. provides enterprise software solutions for global manufacturing companies primarily in the automotive, consumer products, food and beverage, technology, industrial products, and life sciences industries. Its applications provide critical functionality for managing manufacturing resources and operations within and beyond the enterprise, enabling global manufacturers to collaborate with their customers, suppliers and partners. The company offers two deployment models: On Premise and On Demand. With the On Premise model, the company sells a perpetual license for the software and to its customers and then deploy the software on their own computer servers. With On Demand deployment model, customers subscribe to a service and QAD provides access to the software as well as ongoing support services and management of the environment. It also provides services, including consulting, education, and customer support. QAD was founded by Pamela Meyer Lopker in 1979 and is headquartered in Santa Barbara, CA.

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