Declining margins and inefficient capital use have dropped NTNX’s return on invested capital ( ROIC) down from -65% in fiscal 2015 to -135%. The company’s NOPAT margin fell from -48% in fiscal 2015 to -55% in fiscal 2017. The rapid deterioration in NOPAT comes from negative and declining margins. At the same time, NTNX’s after-tax profit ( NOPAT) has fallen from -$117 million to -$421 million, per Figure 1. Since fiscal 2015, NTNX’s revenue has grown an impressive 78% compounded annually. Rapidly Rising Revenue Leads to Rapidly Falling Profits Risk of losing market share, when coupled with highly negative margins, unsustainable cash burn, and a soaring stock price mean Nutanix Inc.
Now, through acquisitions and majority control, one competitor controls nearly half the market and has the ability to cut this firm’s market share. Competitors are quickly encroaching on this tech stock’s market share, despite its impressive top-line growth.
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