The past six months have been a windfall for Viasat’s shareholders. The company’s stock price has jumped 55.9%, hitting $72.20 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy Viasat, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think Viasat Will Underperform?

We’re glad investors have benefited from the price increase, but we’re sitting this one out for now. Here are three reasons why there are better opportunities than VSAT, plus one stock we’d rather own.

1. Revenue Growth Flatlining

Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. Viasat’s recent performance shows its demand has slowed significantly as its revenue was flat over the last two years.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Viasat, its EPS declined by 8.4% annually over the last five years while its revenue grew by 14.1%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Cash Burn Ignites Concerns

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.

While Viasat posted positive free cash flow this quarter, the broader story hasn’t been so clean. Viasat’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 7.5%, meaning it lit $7.51 of cash on fire for every $100 in revenue.

Final Judgment

We see the value of companies helping their customers, but in the case of Viasat, we’re out. Following the recent surge, the stock trades at 10.1× forward EV-to-EBITDA (or $72.20 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. Let us point you toward one of Charlie Munger’s all-time favorite businesses.

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