Globalstar has been on fire lately. In the past six months alone, the company’s stock price has rocketed 195%, reaching $69.08 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Following the strength, is GSAT a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free for active Edge members.
Why Is Globalstar a Good Business?
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 15.6% 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
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
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 32.9% 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 high-quality business, and after the recent surge, the stock trades at 62.4× forward EV-to-EBITDA (or $69.08 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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