Consensus Cloud Solutions (CCSI): Net Margin Decline Reinforces Value Narrative Against Weak Growth Expectations

Consensus Cloud Solutions (CCSI) posted net profit margins of 23.5%, a decrease from 25.1% a year ago. Earnings have declined by 8.9% per year over the last five years, and earnings growth remained negative this period. Looking ahead, investors will note that revenue is forecast to grow just 0.4% per year, with earnings growth projected at 6.9% annually. Both metrics are below the US market averages.

See our full analysis for Consensus Cloud Solutions.

Next up, we will see how these results compare to the most widely held narratives for CCSI. These comparisons often provide new insights and challenge investor assumptions.

See what the community is saying about Consensus Cloud Solutions

DCF Fair Value More Than 3x Share Price

• With Consensus Cloud Solutions trading at $24.99, its DCF fair value stands sharply higher at $83.63. This indicates a substantial valuation gap according to this model.
• According to analysts' consensus view, several factors are behind this disconnect, including:
  • Consensus Cloud Solutions’ price-to-earnings ratio is just 5.8x, less than a third of the peer group average of 19.6x or the software industry average of 35.2x. This implies that the current price heavily supports the undervaluation thesis.
  • Even though revenue is projected to grow at a slow 0.4% a year, the market may already have priced in the lower growth expectations. There could be room for upside if profit margins expand as analysts expect.

Investors are watching closely to see if the discounted price is an opportunity or a warning. See where the consensus narrative lands in light of these numbers. 📊 Read the full Consensus Cloud Solutions Consensus Narrative.

Profit Margins Expected to Climb to 28.1%

• Analysts forecast Consensus Cloud Solutions’ net profit margin will rise from 23.2% today to 28.1% in 3 years, even as revenue growth remains muted.
• The consensus narrative points to strong SaaS operating leverage, cost controls, and product innovation as key drivers:
  • Adjusted EBITDA margins already reach 54.8%, reflecting the company’s ability to extract earnings growth from its existing revenue base and supporting the projection for higher net margins over time.
  • Record corporate revenue retention rates above 100% reinforce the company’s resilience, giving credence to the margin improvement scenarios being modeled.

Price-to-Earnings at 5.8x Signals Deep Discount

• Consensus Cloud Solutions’ PE ratio of 5.8x stands well below the US software industry average of 35.2x and the peer average of 19.6x, signaling the market’s skepticism about long-term growth.
• Analysts' consensus view points out that this deep discount reflects worries over legacy product risk, healthcare sector concentration, and competition:
  • Bears argue that over-reliance on digital fax exposes Consensus to obsolescence if healthcare and enterprise customers move to fully cloud-integrated platforms. This could potentially lead to structural declines in future revenue streams.
  • Despite these risks, steady forecasted earnings growth and lack of flagged major risks suggest that the current multiple may be too pessimistic if margin gains materialize as projected.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Consensus Cloud Solutions on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Consensus Cloud Solutions research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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Consensus Cloud Solutions faces muted revenue growth and ongoing market skepticism about its ability to deliver consistent long-term earnings expansion.

If steady performance is what you’re after, use our stable growth stocks screener (2078 results) to discover companies delivering reliable growth in both revenue and earnings across the cycle.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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