The past six months have been a windfall for Globalstar’s shareholders. The company’s stock price has jumped 89.6%, hitting $56.77 per share. This run-up might have investors contemplating their next move.
Is now still a good time to buy GSAT? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Are We Positive On GSAT?
Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ: GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Globalstar grew its sales at an incredible 16.3% compounded annual growth rate. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Globalstar has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging an eye-popping 45.1% over the last five years. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.
3. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Globalstar’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
Final Judgment
These are just a few reasons why we think Globalstar is a great business, and with the recent surge, the stock trades at 51.4× forward EV-to-EBITDA (or $56.77 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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