Megaport Limited (ASX: MP1) announced its operational updates for Q3 FY2024, ending on 31 March 2024, on 29 April 2024.
The company reported strong revenue growth for the quarter, achieving a 30% year-on-year (YoY) increase to $49.5 million. EBITDA also showed promising growth, rising 92% YoY to $14.0 million.
The company experienced positive net cash flows during the quarter, increasing by $21.9 million YoY to reach $13.4 million. Consequently, Megaport significantly increased its cash balances, delivering a 50% YoY growth rate and ending with a cash position of $73.1 million as of 31 March 2024.
Megaport Share Price has been falling ever since its recent high in March 2024. In the past five years, it had crossed $21 mark in 2021 but could not retain the momentum.
Megaport had delivered promising half-year results in 1H FY2024, which ended on 31 December 2023.
During this period, total revenue was $95.1 million, up $24.4 million or 35% compared to 1H FY23. Annual Recurring Revenue (ARR) grew to $191.7 million in December 2023, a $43.4 million or 29% increase compared to December 2022. Gross profit for 1H FY24 was $66.6 million, up $20.1 million or 43% from 1H FY23.
Megaport delivered a record EBITDA of $30.1 million in 1H FY24, an improvement of $26.7 million or 785% from an EBITDA of $3.4 million in 1H FY23. The net profit for the half-year period was $4.4 million, up $17.9 million from 1H FY23.
Megaport share has potential to exhibit considerable price action as the company is poised to make substantial progress with its sales initiatives in 2024, with a particular emphasis on enhancing its sales capabilities by expanding its sales team and increasing marketing efforts.
The company's strong Annual Recurring Revenue (ARR) continues to support and complement these initiatives. Combined with efforts towards market expansion, these efforts are expected to play a crucial role in driving revenue growth.
The Long-term Investors could soon find an opportunity to invest in it as after experiencing challenges with financial performance and profitability in the past, the company has recently made substantial progress in FY24, demonstrating strong financial growth across key operating metrics, including revenues, earnings, and cash flows.
The company is also positioned to benefit from promising organic and inorganic growth catalysts, which are expected to sustain its robust growth rates.
Despite these positive developments, the company remains overvalued based on exceptionally high valuation metrics over the trailing twelve months, such as a Price-to-Book (P/B) ratio of 14.06x, an Enterprise Value-to-Sales (EV/Sales) ratio of 10.04x, and a Price-to-Cash Flow (P/CF) ratio of 48.99x. These high valuation metrics may impact shareholder value in the short term.
However, given the significant financial advancements made by Megaport, there is anticipation of considerable improvements in valuation and return-generating prospects heading into FY25. The first sign technically could be staying above $10, where accumulation could start. At that level it is expected to provide an attractive investment proposition and allow investors to capitalize on the company’s growth.
Source: Company's Report
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