Is Calix (CALX) Still Attractive After Recent Share Price Pullback?

• If you are wondering whether Calix at around US$51.47 is still reasonably priced or already running ahead of itself, the valuation story is the key thing to focus on next.
• The stock has seen mixed momentum recently, with a 6.2% decline over the last 7 days and an 8.1% decline over the last 30 days, even though the 1 year return stands at 38.6%.
• Recent coverage has centered on Calix as a broadband access and cloud software provider, with attention on how its platform fits into ongoing investments by communications service providers. This context has kept investors focused on the company’s role in broadband infrastructure and how that might relate to market expectations already reflected in the share price.
• Simply Wall St currently gives Calix a valuation score of 5/6, based on being assessed as undervalued on five out of six checks. Next, we will walk through the key valuation approaches behind that score and finish with a way to look beyond the headline numbers to understand the value story in more depth.

Find out why Calix's 38.6% return over the last year is lagging behind its peers.

Approach 1: Calix Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes the cash a business is expected to generate in the future, then discounts those cash flows back to today to estimate what the whole company might be worth now.

For Calix, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flows in $. The latest twelve month free cash flow is reported at about $115.7 million. Simply Wall St uses analyst estimates where available, then extrapolates beyond that. In this case, free cash flow projections reach $502.2 million in 2035, with a path that includes $169 million in 2026 and $231 million in 2027. These figures are all discounted back to today to reflect risk and the time value of money.

Bringing those projected cash flows together, the DCF model arrives at an estimated fair value of about $110.95 per share. Compared with the recent share price of around $51.47, this implies an intrinsic discount of 53.6%, which indicates that Calix is trading materially below this DCF estimate.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Calix is undervalued by 53.6%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Calix.

Approach 2: Calix Price vs Sales

For a profitable company that is still building its earnings base, the P/S ratio can be a useful way to think about value, because it anchors the share price to the revenue the business is already generating rather than to current earnings alone.

What counts as a normal P/S depends on what investors expect for future growth and how much risk they see in the business. Higher growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually points to a lower one.

Calix currently trades on a P/S of 3.38x. That sits above the Communications industry average of 1.93x, but below the peer group average of 4.69x. Simply Wall St also calculates a Fair Ratio of 4.61x, which is the P/S level it would expect for Calix after factoring in elements such as earnings growth, profit margins, industry, market cap and company specific risks.

This Fair Ratio is more tailored than a simple peer or industry comparison, because it ties the suggested multiple to Calix’s own characteristics instead of assuming all companies deserve the same benchmark. With the current P/S at 3.38x versus a Fair Ratio of 4.61x, the shares screen as undervalued on this measure.

Result: UNDERVALUED

P/S ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 19 top founder-led companies.

Upgrade Your Decision Making: Choose your Calix Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce Narratives. Narratives let you attach your own story about Calix to the numbers by linking your assumptions for revenue, earnings, margins and a fair value to a clear financial forecast. You can then compare that Fair Value to the current price on Simply Wall St's Community page, where Narratives are used by millions of investors and update automatically when new information such as news or earnings arrives. For example, one Calix Narrative might lean toward the higher US$90 fair value with faster revenue growth and a richer future P/E. Another might lean toward the lower US$60 fair value with more conservative growth and a lower future P/E. Seeing those side by side helps you decide which story you believe and how the current share price lines up against it.

Do you think there's more to the story for Calix? Head over to our Community to see what others are saying!

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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