Spirent Communications (LSE:SPT) - Share price, News & Analysis

Q: What is the Fair Price of SPT when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

SPT (£2.52) is trading below our estimate of [[fair value]] (£2.87)

SPT fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	2/6
Past Performance	2/6
Financial Health	6/6
Dividends	4/6

SPT Stock Overview

Spirent Communications plc provides automated test and assurance solutions for networks, cybersecurity, and positioning in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.

Rewards

Trading at 12.2% below our estimate of its fair value

Earnings are forecast to grow 6.69% per year

Earnings have grown 43.1% per year over the past 5 years

Risk Analysis

Unstable dividend track record

Spirent Communications Competitors

BATM Advanced Communications

LSE:BVC

UK£151.5m

Aferian

AIM:AFRN

UK£113.7m

Calnex Solutions

AIM:CLX

UK£138.7m

M.T.I Wireless Edge

AIM:MWE

UK£53.1m

Price History & Performance

Summary of all time highs, changes and price drops for Spirent Communications
Historical stock prices
Current Share Price	UK£2.52
52 Week High	UK£3.11
52 Week Low	UK£2.10
Beta	0.52
1 Month Change	7.52%
3 Month Change	5.18%
1 Year Change	-2.41%
3 Year Change	57.45%
5 Year Change	104.97%
Change since IPO	297.26%

Recent News & Updates

May 24

Calculating The Fair Value Of Spirent Communications plc (LON:SPT)

Does the May share price for Spirent Communications plc ( LON:SPT ) reflect what it's really worth? Today, we will...

Shareholder Returns

	SPT	GB Communications	GB Market
7D	4.3%	2.1%	-1.1%
1Y	-2.4%	-12.8%	-9.7%

Return vs Industry: SPT exceeded the UK Communications industry which returned -12.8% over the past year.

Return vs Market: SPT exceeded the UK Market which returned -9.7% over the past year.

Price Volatility

Is SPT's price volatile compared to industry and market?
SPT volatility
SPT Average Weekly Movement	4.1%
Communications Industry Average Movement	4.8%
Market Average Movement	5.4%
10% most volatile stocks in GB Market	10.6%
10% least volatile stocks in GB Market	2.8%

Stable Share Price: SPT is not significantly more volatile than the rest of UK stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: SPT's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1936	1,568	Eric Updyke	https://corporate.spirent.com

Spirent Communications plc provides automated test and assurance solutions for networks, cybersecurity, and positioning in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company operates in Lifecycle Service Assurance and Networks & Security segments. The Lifecycle Service Assurance segment provides testing solutions for 5G mobile core networks, and cellular and Wi-Fi devices in the lab, as well as diagnoses, troubleshoots, and resolves issues with production networks and services.

Spirent Communications Fundamentals Summary

How do Spirent Communications's earnings and revenue compare to its market cap?
SPT fundamental statistics
Market Cap	US$1.84b
Earnings (TTM)	US$89.20m
Revenue (TTM)	US$576.00m

20.6x

P/E Ratio

3.2x

P/S Ratio

Is SPT overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
SPT income statement (TTM)
Revenue	US$576.00m
Cost of Revenue	US$151.30m
Gross Profit	US$424.70m
Other Expenses	US$335.50m
Earnings	US$89.20m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

Aug 04, 2022

Earnings per share (EPS)	0.15
Gross Margin	73.73%
Net Profit Margin	15.49%
Debt/Equity Ratio	0%

How did SPT perform over the long term?

See historical performance and comparison

Dividends

2.2%

Current Dividend Yield

46%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is SPT undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for SPT?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for SPT. This is calculated by dividing SPT's market cap by their current preferred multiple.
What is SPT's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$1.84b

SPT key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	3x
Enterprise Value/EBITDA	13.5x
PEG Ratio	3.1x

Price to Earnings Ratio vs Peers

How does SPT's PE Ratio compare to its peers?

SPT PE Ratio vs Peers

The above table shows the PE ratio for SPT vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	20.9x
BVC BATM Advanced Communications	12.7x	n/a	UK£151.5m
AFRN Aferian	22.6x	12.2%	UK£113.7m
CLX Calnex Solutions	30.6x	15.3%	UK£138.7m
MWE M.T.I Wireless Edge	17.6x	5.7%	UK£53.1m
SPT Spirent Communications	20.6x	6.7%	UK£1.5b

Forward PE

Price-To-Earnings vs Peers: SPT is good value based on its Price-To-Earnings Ratio (20.6x) compared to the peer average (20.9x).

Price to Earnings Ratio vs Industry

How does SPT's PE Ratio compare vs other companies in the European Communications Industry?

Price-To-Earnings vs Industry: SPT is good value based on its Price-To-Earnings Ratio (20.6x) compared to the UK Communications industry average (21.6x)

Price to Earnings Ratio vs Fair Ratio

What is SPT's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

SPT PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	20.6x
Fair PE Ratio	27.2x

Price-To-Earnings vs Fair Ratio: SPT is good value based on its Price-To-Earnings Ratio (20.6x) compared to the estimated Fair Price-To-Earnings Ratio (27.2x).

Share Price vs Fair Value

What is the Fair Price of SPT when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: SPT (£2.52) is trading below our estimate of fair value (£2.87)

Significantly Below Fair Value: SPT is trading below fair value, but not by a significant amount.

Price to Earnings Growth Ratio

PEG Ratio: SPT is poor value based on its PEG Ratio (3.1x)

Discover undervalued companies

Future Growth

How is Spirent Communications forecast to perform in the next 1 to 3 years based on estimates from 8 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

6.7%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: SPT's forecast earnings growth (6.7% per year) is above the savings rate (0.9%).

Earnings vs Market: SPT's earnings (6.7% per year) are forecast to grow slower than the UK market (10.9% per year).

High Growth Earnings: SPT's earnings are forecast to grow, but not significantly.

Revenue vs Market: SPT's revenue (4.6% per year) is forecast to grow faster than the UK market (4.1% per year).

High Growth Revenue: SPT's revenue (4.6% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: SPT's Return on Equity is forecast to be low in 3 years time (19.2%).

Discover growth companies

Past Performance

How has Spirent Communications performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

43.1%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: SPT has high quality earnings.

Growing Profit Margin: SPT's current net profit margins (15.5%) are lower than last year (16.2%).

Past Earnings Growth Analysis

Earnings Trend: SPT has become profitable over the past 5 years, growing earnings by 43.1% per year.

Accelerating Growth: SPT's earnings growth over the past year (5.7%) is below its 5-year average (43.1% per year).

Earnings vs Industry: SPT earnings growth over the past year (5.7%) underperformed the Communications industry 46.4%.

Return on Equity

High ROE: SPT's Return on Equity (19.9%) is considered low.

Discover strong past performing companies

Financial Health

How is Spirent Communications's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: SPT's short term assets ($368.6M) exceed its short term liabilities ($176.7M).

Long Term Liabilities: SPT's short term assets ($368.6M) exceed its long term liabilities ($67.1M).

Debt to Equity History and Analysis

Debt Level: SPT is debt free.

Reducing Debt: SPT has not had any debt for past 5 years.

Debt Coverage: SPT has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: SPT has no debt, therefore coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is Spirent Communications's current dividend yield, its reliability and sustainability?

Dividend Score

4/6

Dividend Score 4/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.23%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: SPT's dividend (2.23%) is higher than the bottom 25% of dividend payers in the UK market (1.89%).

High Dividend: SPT's dividend (2.23%) is low compared to the top 25% of dividend payers in the UK market (5.29%).

Stability and Growth of Payments

Stable Dividend: SPT's dividend payments have been volatile in the past 10 years.

Growing Dividend: SPT's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonably low payout ratio (46.1%), SPT's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its reasonably low cash payout ratio (44.2%), SPT's dividend payments are well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

4.7yrs

Average management tenure

CEO

Eric Updyke

3.17yrs

Tenure

US$3,434,166

Compensation

Mr. Eric Updyke has been Chief Executive Officer and Director at Spirent Communications plc since May 1, 2019. He serves as Director at Symend Inc. He served on the Executive Management team of Amdocs repo...

CEO Compensation Analysis

Compensation vs Market: Eric's total compensation ($USD3.43M) is above average for companies of similar size in the UK market ($USD2.05M).

Compensation vs Earnings: Eric's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: SPT's management team is considered experienced (4.7 years average tenure).

Board Members

Experienced Board: SPT's board of directors are considered experienced (5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: SPT insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/07/03 00:00
End of Day Share Price	2022/07/01 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31