One of the worst performers on the market today has been the Speedcast International Ltd (ASX: SDA) share price.
In late morning trade the shares of the provider of satellite-based communication networks and services are down 6% to $5.25 following the release of its full-year results.
What happened in FY 2017?
For FY 2017 Speedcast delivered total revenue of US$514.2 million and earnings before interest, tax, depreciation, and amortisation (EBITDA) of US$122.6 million. This was an impressive 136% and 195% increase, respectively, on FY 2016's result.
Speedcast's EBITDA grew at a quicker rate than revenue due to its expanding EBITDA margin. It widened from 19% to 23.8% thanks to cost synergies from the integration of Harris CapRock and operational leverage from its increased scale.
On the bottom line the company posted a 5.5% year-on-year decline in net profit after tax to US$5.5 million or 2.3 U.S. cents per share. This decline was the result of acquisition-related transaction costs, integration costs and restructuring costs.
On an underlying basis which excludes these costs, net profit after tax increased 112% to approximately US$24.1 million. Which based on its 240.9 million shares outstanding, means underlying earnings per share was 10 U.S. cents or 12.7 Australian cents.
A solid performance from its Maritime segment played a key role in the strong performance. The company's biggest segment generated 40% of total revenue thanks to a large increase in the number of VSAT vessels due to the Harris CapRock acquisition.
This offset a weaker year from its Energy segment which did not achieve revenue growth in the second-half due to higher levels of churn. It contributed 38% of total revenue.
The company's EEM segment had a mixed year and delivered revenue growth of 1% year-on-year. It accounts for 19% of total revenue now, but could be a much bigger contributor in FY 2018 thanks to its NBN contract win. That deal is expected to contribute around $30 million in FY 2018 alone.
Why are its shares lower?
Although the company achieved its guidance, I suspect the market was pricing in an outperformance or a stronger outlook.
In FY 2018 management advised that the company is expected to deliver stronger organic growth than in FY 2017. Readers should note that this is organic and not total growth. A lot of FY 2017's growth was the result of acquisitions.
Should you invest?
I think Speedcast is a good company but its shares do look a touch expensive at 41x full-year underlying earnings per share. As a result, I would suggest investors wait for opportunities to buy in at a more attractive price. In the meantime, I see more value in the shares of the unloved Telstra Corporation Ltd (ASX: TLS).
