Symantec trades at a greater than 15% free cash flow yield (FCF/EV) or roughly 6.5 times free cash flow. I cannot recall ever seeing a liquid, large cap stock with fairly good earnings visibility trade at such a low multiple in a time with little market stress. Even during times of market stress few stocks of this kind ever trade so cheaply.
Symantec's earnings visibility is a function of its large recurring revenue stream. While Symantec is best known for its Norton anti-virus product, consumer sales make up less than a third of Symantec's revenue. Symantec's corporate security and compliance combined with storage and server management make up nearly 2/3 of Symantec's revenue. Of these revenues over 60% are recurring.
Software investors are growth oriented and few are value oriented. This is the reason I believe this bargain is being made available. I believe that an aggressive share repurchase could serve as a catalyst for shares to achieve a more reasonable valuation. Currently, Symantec is repurchasing shares at a pace of $800 million a year or a little less than 8% of enterprise value. They are likely to increase the pace of their share repurchases after the most recent decline in the stock.
CA Technologies traded at a 14.5% free cash flow yield this Summer and looked very similar to the way Symantec does now. Both are steady technology companies, with little of the growth that technology investors desire. An activist stepped in and helped nudge the company into returning more cash to shareholders, which led to a nearly 40% rise from the lows. Symantec trades at a cheaper valuation than CA did at its low point.