CSP Inc. (CSPI) | Investment Case

1. Company Snapshot

1.a. Company Description

CSP Inc.develops and markets IT integration solutions, security products, managed IT services, purpose built network adapters, and cluster computer systems for commercial and defense customers worldwide.It operates in two segments, Technology Solutions and High Performance Products.

The Technology Solutions segment provides third-party computer hardware and software as a value added reseller to various customers in Web and infrastructure hosting, education, telecommunications, healthcare services, distribution, financial and professional services, and manufacturing industries.This segment also offers professional IT consulting services, such as planning, designing, assessment, implementation, migration, optimization, and project management; storage and virtualization solutions; enterprise security intrusion prevention, network access control, and unified threat management services; and IT security compliance services.In addition, this segment provides unified communications, wireless, and routing and switching solutions; custom software applications and solutions development and support services; optimization, maintenance, and technical support services; and managed IT services, such as monitoring, reporting, and management of alerts for the resolution and preventive general IT, as well as IT security support tasks.

Further, this segment offers managed and cloud services, such as proactive monitoring and remote management of IT infrastructure, managed and hosted unified communication services, security, and backup and replication.The High Performance Products segment offers ARIA Software-Defined Security, a cybersecurity solution; Myricom network adapters; and multicomputer products for digital signal processing applications in the defense markets.CSP Inc.

was incorporated in 1968 and is headquartered in Lowell, Massachusetts.

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1.b. Last Insights on CSPI

CSP Inc.'s recent stock performance was positively driven by strong fiscal 2025 first quarter results, with services revenue growing 17% and gross margin expansion. The company's momentum in its AZT PROTECT business and growing recurring sales as a percentage of total revenue also contributed to the positive performance. Additionally, the company's solid cash position of over $30 million and quarterly dividend declaration of $0.03 per share further boosted investor confidence.

1.c. Company Highlights

Last Price	8.7
Change Percentage	-0.11%
Open	8.73
Previous Close	8.71
Market Cap ( Millions)	86
Volume	22332
Year High	17.94
Year Low	8.04
M A 50	10.7
M A 200	11.76

FCF Yield	-3.27%
Dividend Yield	1.38%
ROE	-1.02%
Debt / Equity	6.05%
Net Debt / EBIDTA	3904.92%
Price To Book	1.83
Price Earnings Ratio	-174.04
Price To FCF	-30.57
Price To sales	1.57
EV / EBITDA	-112.52

2. CSP Inc. Posts Mixed Q1 Results Amidst Integration and Growth Initiatives

CSP Inc. reported revenue of $12,000,000 for the first quarter, a decline from $15,700,000 in the same period last year, primarily due to a one-time deal in the prior-year quarter. However, service revenue grew 14.6% to $5,300,000, driven by momentum in technology solutions and managed services. Gross profit increased to $4,700,000, with a gross margin of 39.3%. Net income was $91,000, or $0.01 per diluted share, compared to $42,000, or $0.005 per diluted share, in the prior-year period.

Publication Date: Mar -09

                                    📋 Highlights
                                    Revenue Decline::
                                                Q1 FY2026 revenue dropped 21.3% to $12M vs. $15.7M, due to a prior-year $4.5M one-time product deal.
Service Revenue Growth::
                                                Technology solutions drove 14.6% year-over-year growth to $5.3M.
Gross Profit Margin::
                                                Gross profit rose to $4.7M, with margin expanding to 39.3% of revenue.
Managed Services Momentum::
                                                New MSP customers generated ~$100K/month in recurring revenue, with 40 multisite expansion clients.
AZT Cybersecurity Expansion::
                                                46 unique customers for AZT Protect, with integration to Acronis in early stages and potential revenue upside.

                                

Segment Performance

The company's managed cloud and managed service practice continues to excel, with new MSP customers generating nearly six figures in monthly revenue. The AZT Protect cybersecurity solution saw year-over-year revenue growth, with 46 unique customers and opportunities for multisite expansions. The company is integrating Acronis with its services, specifically with AZT protection, which will allow the sales team to expand the backup service to include AZT for customers who want that protection.

Expense Management and Profitability

Research and development expenses rose 9.2% to $858,000, while sales and general and administrative expenses declined $143,000 to $4,000,000. The company's net income margin improved, reflecting its efforts to manage expenses and drive profitability.

Balance Sheet and Dividend

The company maintains a strong balance sheet with $24,900,000 in cash and cash equivalents. A dividend of $0.03 per share will be paid on March 12 to shareholders of record as of February 26, representing a dividend yield of 1.38%. The company's P/E Ratio is -174.24, indicating that it may be overvalued relative to its earnings.

Valuation and Outlook

With a P/S Ratio of 1.57 and EV/EBITDA of -112.7, the stock may be reasonably valued relative to its sales and EBITDA. However, the negative ROIC and ROE indicate that the company is not generating returns on its investments. As the company continues to integrate AZT into its services and expand its managed services offerings, it may be able to drive growth and improve its returns. Analysts estimate next year's revenue growth at None%, suggesting a challenging environment. The company's plans to repurchase shares and continue offering financing to high-quality customers may also support its stock price.

3. NewsRoom

ARIA Cybersecurity Announces a Leading Pet Food Producer Deploys AZT PROTECT(TM)

Mar -04

Source: accessnewswire.com

Is CPS's Low Valuation a Strong Reason to Invest in Its Stock?

Feb -24

Source: zacks.com

ARIA Cybersecurity Announces Major Oil Refiner Deploys AZT PROTECT(TM)

Feb -24

Source: accessnewswire.com

CSP Q1 Earnings & Revenues Fall Y/Y, Margins Rise on Service Growth

Feb -16

Source:

CSP Inc. (CSPI) Q1 2026 Earnings Call Transcript

Feb -14

Source: seekingalpha.com

CSPi Reports 14.6% Services Revenue Growth, Significantly Expands Gross Margin and Generates FY 2026 First Quarter Profit

Feb -12

Source: accessnewswire.com

CSPi to Announce Fiscal 2026 First Quarter Results on February 12, 2026

Feb -06

Source: accessnewswire.com

CSP (NASDAQ:CSPI) Shares Pass Below 200-Day Moving Average – What’s Next?

Jan -20

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.72%)

6. Segments

Technology Solutions - U.S.

Expected Growth: 7.4%

Growing demand for digital transformation, increasing cybersecurity threats, and government investments in IT infrastructure are driving the growth of Technology Solutions in the U.S.

High Performance Products

Expected Growth: 10.2%

Growing demand for high-density computing solutions in data centers, driven by increasing adoption of cloud computing, big data, and IoT, fuels the growth of CSP Inc.'s High Performance Products. Energy efficiency and reliability features also contribute to the segment's growth.

Technology Solutions - United Kingdom

Expected Growth: 8.5%

The UK's increasing adoption of cloud computing, cybersecurity concerns, and the need for IT infrastructure modernization drive growth in the Technology Solutions segment. CSP Inc.'s comprehensive solutions position the company for success in this expanding market.

7. Detailed Products

Cloud Storage

Secure and scalable cloud-based storage solutions for businesses of all sizes

Compute Services

On-demand access to virtual machines, containers, and serverless computing resources

Database Management

Relational and NoSQL database services for structured and unstructured data

Security and Compliance

Comprehensive security and compliance solutions for data protection and regulatory adherence

Networking and Connectivity

High-performance networking and connectivity solutions for hybrid and multi-cloud environments

Analytics and AI

Advanced analytics, machine learning, and artificial intelligence services for data-driven insights

DevOps and Collaboration

Integrated development, testing, and deployment tools for agile teams and continuous integration

8. CSP Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for CSP Inc. is moderate due to the availability of alternative products and services in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the presence of a large number of customers with significant purchasing power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the presence of multiple suppliers and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of barriers to entry, such as high capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established players in the market, leading to a highly competitive environment.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	5.03%
Debt Cost	3.95%
Equity Weight	94.97%
Equity Cost	10.51%
WACC	10.18%
Leverage	5.30%

11. Quality Control: CSP Inc. passed 6 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

ISG

A-Score: 5.5/10

Value: 4.5

Growth: 2.6

Quality: 5.6

Yield: 6.0

Momentum: 9.0

Volatility: 5.3

1-Year Total Return ->

TaskUs

A-Score: 4.7/10

Value: 5.8

Growth: 8.2

Quality: 6.7

Yield: 0.0

Momentum: 3.0

Volatility: 4.7

1-Year Total Return ->

Hackett

A-Score: 4.5/10

Value: 2.8

Growth: 5.0

Quality: 5.7

Yield: 5.0

Momentum: 1.0

Volatility: 7.7

1-Year Total Return ->

Xerox

A-Score: 4.2/10

Value: 8.0

Growth: 2.3

Quality: 1.8

Yield: 10.0

Momentum: 0.5

Volatility: 2.3

1-Year Total Return ->

Unisys

A-Score: 3.2/10

Value: 10.0

Growth: 2.2

Quality: 3.5

Yield: 0.0

Momentum: 0.5

Volatility: 3.0

1-Year Total Return ->

CSP

A-Score: 3.0/10

Value: 5.7

Growth: 3.9

Quality: 3.5

Yield: 1.0

Momentum: 1.5

Volatility: 2.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

63.14%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.18%

CSP Inc. - US1263891053

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on CSPI

1.c. Company Highlights

Higher Yield

Strong Momentum

More Volatile

Average Growth

Fairly Valued

Expensive

Weak Momentum

Average Quality

Stable Momentum

Lower Growth

Cheaper

Medium Volatility

2. CSP Inc. Posts Mixed Q1 Results Amidst Integration and Growth Initiatives

Segment Performance

Expense Management and Profitability

Balance Sheet and Dividend

Valuation and Outlook

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.72%)

6. Segments

Technology Solutions - U.S.

Expected Growth: 7.4%

High Performance Products

Expected Growth: 10.2%

Technology Solutions - United Kingdom

Expected Growth: 8.5%

7. Detailed Products

Cloud Storage

Compute Services

Database Management

Security and Compliance

Networking and Connectivity

Analytics and AI

DevOps and Collaboration

8. CSP Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: CSP Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

8.7$

Current Price

8.7$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA