Extreme Networks, Inc. (NASDAQ:EXTR) is a company that provides software-driven networking solutions for enterprises, data centers, and service providers. It competes with other technology firms like Juniper Networks, Ciena Corporation, Harmonic Inc., F5, Inc., and NetApp, Inc. These companies are all part of the networking and communications equipment industry, where efficient capital utilization is crucial for maintaining competitive advantage.
Extreme Networks currently has a Return on Invested Capital (ROIC) of -5.01%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 11.46%. This results in a ROIC to WACC ratio of -0.44, indicating that the company is not generating enough returns to cover its cost of capital. This is a concern for investors as it suggests inefficient use of capital.
In comparison, Juniper Networks has a ROIC of 4.39% and a WACC of 7.21%, resulting in a ROIC to WACC ratio of 0.61. This indicates that Juniper is generating returns above its cost of capital, though not as efficiently as some of its peers. Ciena Corporation also shows a positive ROIC of 2.97% against a WACC of 8.61%, with a ROIC to WACC ratio of 0.34, suggesting moderate capital efficiency.
Harmonic Inc. and F5, Inc. demonstrate more efficient capital utilization with ROIC to WACC ratios of 1.47 and 1.59, respectively. Harmonic's ROIC of 11.76% against a WACC of 8.00% and F5's ROIC of 13.70% against a WACC of 8.62% indicate that both companies are generating returns well above their cost of capital, which is favorable for investors.
NetApp, Inc. stands out with a ROIC of 16.49% and a WACC of 9.63%, resulting in the highest ROIC to WACC ratio of 1.71 among the peers. This suggests that NetApp is utilizing its capital most efficiently, generating significant returns above its cost of capital, and potentially creating higher value for its shareholders.
