Viasat’s (VSAT) fiscal first-quarter earnings report, unveiled on August 5, show that the outlook of three of the company’s key businesses remains quite bright.
Meanwhile, the firm’s cash flow remained impressive last quarter, and one of its top investors provided convincing evidence showing that VSAT stock remains drastically undervalued despite its huge, recent rallies.
Given all of this information, growth investors should consider buying VSAT stock.
Three Key Businesses Look Poised to Boost VSAT Over the Longer Term
The revenue of the company’s Defense and Advanced Technologies (DAT) unit jumped 15% versus the same year earlier to $344 million, propelled “primarily by strong growth in information security and cyber defense and space and mission systems product
revenues,” VSAT reported.
Even more impressively, DAT’s contract wins climbed 22% YOY to $428 million. And during the quarter, the unit was one of three companies selected by the U.S Space Force to develop prototypes for “a new optical laser communications terminal that can support military operations.”
Also commendable has been the performance of Viasat’s maritime internet unit, in-line with my previous praise for the business. The unit obtained more than 1,000 orders for its new high-speed NexusWave product, launched in May 2024, and last quarter, it installed internet service on 190 ships, representing an increase of over 100% versus the previous quarter.
Finally, the service revenue of its aviation unit rose 14% YOY to $293 million, and a major airline, LATAM Group, agreed to implement VSAT’s internet service on its widebody aircraft, indicating that the aviation business still has room to expand significantly.
Also boding well for the future growth of aviation is its launch of broadband satellite service “over the Arctic region” for governments. With nations’ activity in this area having increased significantly in recent years, this product could generate needle-moving growth for VSAT.
Strong Cash Flow and the Activist Investor’s Persuasive Argument
Viasat’s operating cash flow advanced $107 million last quarter versus the same period a year earlier to $258 million, while its free cash flow increased $210 million YOY, coming in at $60 million for the quarter.
And in a July 31 letter, activist investor Carronade Capital estimated that DAT, if it was trading on its own, could have an enterprise value of $16.2 billion, based on analysts’ average estimate of the company’s EBITDA for the current fiscal year and the median multiple of other companies with similar businesses. That’s well above VSAT’s enterprise value, as of Aug. 29, of $10.25 billion.
And, according to Carronade, the company’s remaining businesses are poised to generate annual EBITDA of $1.2 billion during the current fiscal year, so they are worth another $4.9 billion.
Further, VSAT’s enterprise value is boosted by an additional $1 billion as a result of a recent legal settlement, giving VSAT stock a total value of as much as $112.49 per share, versus its closing price on August 29 of $32.33.
Also suggesting that VSAT is extremely overvalued is its very low current price-sales ratio of 0.9 times.
*This article is intended to be informational only; it is not financial advice.
