IDT - IDT Corporation: Strong Fundamentals With An Attractive Valuation

2024-03-22 07:46:13 ET

Summary

• IDT Corporation shows strong organic growth and profitability from its three high-margin, rapidly growing businesses: NRS, BOSS Money, and Net2Phone (N2P).
• 2Q24 marks a milestone as these businesses achieve self-sustainability, strengthening the balance sheet and enabling efficient resource allocation.
• Sum-of-the-parts (SOTP) valuation suggests a 17% upside potential, indicating attractive valuation. Thus, I rate it as a 'buy'
• Cash continues to pile up as it makes up 23% of its market cap, and management continues to return value to shareholders via potential acquisitions, buyback, or dividends.
• Further catalysts await for investors if management can command the right multiples for the spin-offs.

Investment Thesis

The main thesis of IDT Corporation (IDT) revolves around the potential spin-offs of its three high-margin, rapidly growing businesses: NRS, BOSS Money, and Net2Phone (N2P).

However, the decision to postpone the spin-offs is rooted in a prudent assessment of market conditions and valuation dynamics. By awaiting a more favorable market environment, the management team aims to maximize shareholder value by ensuring that the spin-offs occur at an opportune moment, where they can fetch an optimal valuation....

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