What a time it’s been for Globalstar. In the past six months alone, the company’s stock price has increased by a massive 69.3%, reaching $36.78 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy GSAT? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does GSAT Stock Spark Debate?
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.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Globalstar’s 14.8% annualized revenue growth over the last five years was exceptional. Its growth beat the average business services company and shows its offerings resonate with customers.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
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 33.4% 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.
One Reason to be Careful:
Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Although Globalstar has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 4.8%, meaning management lost money while trying to expand the business.
Final Judgment
Globalstar’s positive characteristics outweigh the negatives, and after the recent rally, the stock trades at 65.5× forward EV-to-EBITDA (or $36.78 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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