Pure Storage Inc (NYSE:PSTG) is still reeling from the effects of the slump that rocked the market in October. Despite the downside, the company is doing well as the latest earnings attest.
Pure Storage financial health
The latest earnings indicate a very strong balance sheet. Particularly, the company continued the year-on-year improvement in revenue. The total revenue for Q3 of FY19 upped by 34% on Y/Y basis, as well as the gross margin topping 66.8% GAAP. This represents the highest margin so far in the company’s earnings history.
Further, the company reported increased operating margin, both GAAP and non-GAAP. Interestingly, the performance beats expectations.
Pure Storage maintains $1.14 billion in cash and short-term investments. In addition, the receivables amount to $305.65 while physical assets are worth $115.27million. On the other hand, long-term investments together with other assets all amount to $196 million. The total inventory is $50.74 million.
On the other hand, the liabilities are just a little above the asset worth with stock taking the lion’s share. The total liabilities sum to $1.81 billion with total debt making a little over 24% of it. Particularly, this implies that the company is currently loss making. Further, this could impact the price of the company’s stock price going forward.
However, with the $1.14 billion on hand, the company can comfortably take care of its commitments, short-term and long-term.
Share price performance
Like many other firms on the S&P 500, Pure Storage took a hard hit from the general slump about a month ago. Interestingly, the share price was edging towards 29 before the market wiped out the gains.
Considering the moving averages for both the 50-day and the 200-day, the stock price faces resistance not far off. The MA (50) indicates a resistance of 22.45 while the MA (200) indicates a resistance of 21.29.
In essence, it is evident that the company has been performing poorly for the most of the last past year. However, the last one month shows strong figures which should give investors hope for much better performance.
A further look at the relationship between the future cash flow value and present value of the stock indicates overvaluation. In particular, the current stock price stands at 18.04. However, the future cash flow value gives a stock price of 11.12, a value way lower than the present figure.
Furthermore, the company’s non-GAAP earnings per share are positive. The strong performance is also supported by a positive year-on-year non-GAAP operating margin of 9.1%.
Future outlook
Despite the strong earnings of the last quarter, the company is still generally loss making. This is because the asset value is mostly below total liabilities.
However, the firm will most likely experience higher growth in the coming months. Particularly, the company raised its FY19 guidance on expectations of higher growth.
Tim Riitters, CFO, Pure Storage said, “Q3 was a strong quarter for Pure with revenue and margins exceeding our expectations. As we finish the fiscal year we are excited about the opportunities ahead, and have raised FY19 guidance to reflect the momentum we are seeing in our business.”
Further, the company launched new Pure Storage Cloud Data Services that target institutional clients. In addition, the firm will avail its storage software to the public through a partnership with Amazon’s AWS.
Furthermore, Pure Storage’s revenue is likely to extend the positive trend as the industry continues to expand. According to the latest earnings, the company outperforms the market in terms of revenue growth. Therefore, the revenue is likely to stay on top as the market expands.
In particular, most analysts concur that revenue will grow at around 20% annually on the back of strong performance.