Red Hat (RHT, Financial) has introduced the Red Hat Cloud Infrastructure Version 5 or RHCI 5 in the OpenStack Conference in Paris. RHCI is an integrated management solution that helps customers with their shift towards OpenStack powered cloud from conventional data center virtualization. In November, Red Hat declared the data of Red Hat Enterprise Linux 7 Atomic Host which allows a rationalized host platform enabled to execute application containers.
Innovations will lead to growth
Red Hat’s new innovations during the quarter are gaining significant traction from new as well as well-established customers such as Wipro.
Red Hat declared the expansion of its strategic relationships with major alliance partners for accelerating the implementation of open hybrid cloud solutions. For instance, the open source practice of Wipro is expected to build a combined go-to-market relationship with Red Hat and implement an integrated Cloud strategy and unique solutions for their clients framed around Red Hat CloudForms, OpenShift and OpenStack.
Going forward, FeedHenry has officially partnered with the Mobile Backend of Red Hat in this past quarter. FeedHenry is expected to support the expansion of Red Hat in this innovative growth vertical offering products and services to developers developing mobile applications for the enterprise.
The key alliance of Red Hat with the software major Wipro and the partnership of former with FeedHenry is forecasted to drive significant traction for the unique cloud strategy of Red Hat.
The share count for Red Hat reduced during the third quarter reflecting the acquisition of 5.3 million Red Hat shares being a part of its accelerated stock repurchase program launched in October. It has bought back $535 million of Red Hat common stock to date for this year. Red Hat reported non-GAAP diluted earnings per share of $0.42, exceeding its prior guidance by $0.02 and representing $0.06 per share improvement compared to the third quarter last year.
In conclusion, Red Hat is raising its operating cash flow guidance in the lower range by $30 million and in the higher range by $10 million to define a new complete year range of $600 million to $610 million. Therefore, Red Hat is extremely optimistic about developing its business and attracting new clients adding to its balance sheet items.
Conclusion
The trailing P/E and forward P/E ratios of 72.62 and 37.09 represent the successful cost-cutting efforts of the company. The PEG ratio of 2.54, above 1 indicates slower growth. The profit margin (ttm) of 10.90% is satisfactory. However, the revenue per share and diluted EPS of 8.81 and 0.95 respectively depicts poor investor earnings. The quarterly revenue growth and quarterly earnings growth of 19.10% and 14.70% respectively signifies healthy growth in shareholder earnings.
The current ratio of 1.17 suggests the robustness of the company’s balance sheet. Finally, looking at the solid long-term growth prospects indicated by the CAGR for the next five years per annum of 15.34% comparable to the industry’s average of 20.61% and expect promising returns in a long run.
