A Look At Calix’s Valuation After New Three Year US Agriculture Contract And Share Price Surge

Calix (ASX:CXL) has drawn fresh attention after securing a three year supply contract with a major US agricultural company. The contract is expected to contribute up to A$10 million in revenue each year.

See our latest analysis for Calix.

The contract news arrived after a sharp move in the share price, with a 30 day share price return of 122.61% and a 90 day share price return of 224.05%. However, the 3 year total shareholder return of a 72.94% decline shows that longer term holders have had a very different experience. Recent momentum therefore appears more like a sharp reset in risk appetite than a steady trend.

If Calix’s contract win has you looking beyond a single name, it could be a good moment to broaden your watchlist with fast growing stocks with high insider ownership.

So with Calix now trading at A$1.28 and analyst targets sitting higher at A$1.93, is the recent share price surge still leaving room for upside, or is the market already pricing in future growth?

Most Popular Narrative: 33.5% Undervalued

Calix’s most followed narrative points to a fair value of A$1.93 per share compared with the last close at A$1.28, indicating a valuation gap driven by expectations for revenue growth and margin improvement.

Aggressive cost base reductions and the completion of a heavy investment cycle have set the stage for improved operating leverage and net margin expansion, positioning Calix for higher profitability as revenue continues to increase.

Read the complete narrative.

Curious what earnings profile underpins that gap between price and fair value? Revenue, margins and future profit multiples all have to work in sync. The most followed narrative lays out a tight path for each. The key moving parts are more ambitious than you might expect for a loss making decarbonisation stock.

Result: Fair Value of A$1.93 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this depends on securing project and grant funding on schedule and reducing reliance on magnesia, which still accounts for most of Calix’s current revenue.

Find out about the key risks to this Calix narrative.

Another Angle On Value

That A$1.93 fair value hinges on optimistic revenue and margin forecasts, but the current P/S of 9.8x tells a different story. It is far above the Australian Chemicals industry at 3.7x, the peer average at 1.6x, and a fair ratio of 3.2x, which points to meaningful valuation risk if sentiment cools.

With pricing already so far ahead of industry, peers, and the fair ratio, the real question is whether Calix can grow into this multiple fast enough for you to stay comfortable holding that risk.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Calix Narrative

If you look at the numbers and come to a different conclusion, or simply prefer to test your own assumptions, you can build a full narrative in just a few minutes with Do it your way.

A great starting point for your Calix research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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