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Spirent Communications Plc - Smarter Connectivity

Writen by Ed Stacey

Spirent Communications is a world leader in providing products and services for test and measurement of communications systems across fixed and mobile voice, data and video applications and networks.
In this report we argue that the company is positioned for increased earnings growth in the coming years, based on the success of the recent cost-base reduction program, and the company’s strategic alignment to the major growth drivers in the market place.

We are forecasting continued growth in underlying operating profit for Spirent in 2017e and 2018e, 18% and 11% respectively. Our chart and commentary on p2 provide some detail of the drivers.
The balance sheet position is strong, with $115m of net cash at Dec 31 2017e (our forecast).
In valuation terms, the shares now trade on 11.9x EV/OperatingProfit  for 2018e, which we believe offers upside if the operating profit growth continues as we expect.

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