When analyzing Citrix and its report, one can clearly see that the company operates a sound business in a growth industry.

NEW YORK (TheStreet) -- It goes without saying that the stock market has become overly enamored with cloud companies and in particular those that specialize in virtualization such as VMware(:VMW). Then there is the so-called "big data" provided by storage giant EMC(:EMC), and the new cloud buzzword "SaaS" or "software as a service" -- a specialty that has ignited a rash of M&A buying from names such as Oracle(:ORCL) and IBM(:IBM) due to fears of being left behind.

Judging by the multiples at which these stocks trade, it seems not only is the market expecting great things from these companies, but the companies themselves are expecting great returns from their services as evident by their CAPEX spending and their internal focus toward R&D.

The good thing is, at least expectations are in line. However, as Wall Street works toward sorting all of this out, I wonder if it is prudent to continue to throw valuation metrics out of windows for a market that has yet to prove which players will survive and which ones won't.

One other name that is rarely mentioned in these discussions is that of Citrix Systems(:CTXS). If one company deserves the title of "cloud pioneer" or even the "founder of virtualization," it would be Citrix as its partnership with Microsoft(:MSFT) has long made it the standard for anytime/anywhere computing since its founding over two decades ago.

It seems, however, that as names such as F5(:FFIV), Cisco(:CSCO) and the aforementioned VMware continue to get the lion's share of the headlines. Investors often interpret this as having a better business or even a better product. But the fact of the matter is Citrix has emerged as the leader in desktop virtualization by having established itself as the go-to vendor -- a market that will only grow as more companies move to a virtualized environment. The company affirmed its positioning last week upon the release its first-quarter announcement -- one that reminded investors why Citrix will likely not be ignored for long

A virtually exceptional quarter

Last week, the company reported a profit (excluding items) of 59 cents per share -- representing a stunning increase of 18% annually from its previous report of 50 cents. Analysts polled by Thomson Reuters had expected 51 cents. What made this even more impressive was the fact that back in January, the company had guided down to 49 to 51 cents. It reported revenues of $589 million or a growth of 20% from the previous year, while analysts had been expecting $562.2 million.

The company reported an increase of 19% in license revenue as it also saw an increase in demand for its NetScaler product -- one that grew 46% on an annual basis. Also noteworthy was the 21% increase in that aforementioned buzzword of SaaS. Although its operating income arrived relatively flat from a year ago, the company deserves some credit for the strength shown as operating margin surpassed street estimates of 22% by coming it at 23.5%.

In terms of guidance, the only disappointment that I can find was that Citrix expects earnings-per-share (excluding items) of 58 cents or 59 cents. Although it is higher than the 57 cents it earned last year, it is considerably below analysts' forecast of 63 cents. The company also guided revenue to arrive between $605 million and $615 million -- representing an increase of 15% while analysts had been modeling $603.3 million.

Moving forward

As good as these numbers were, I think by looking at the less than stellar guidance, it is safe to say that the company appreciates just how fierce competition is going to continue to be not only from the typical rivals but also from Microsoft and a committed Red Hat(:RHT), but also from hardware names such as Cisco, F5 and EMC. Be that as it may, I don't think its guidance should be taken as anything more than a company being cautious. What its overall report tells me is that companies are depending more and more on Citrix' products and services -- and it is one of which astute investors should take notice. As the future of IT takes shape, it will be interesting to see what becomes of all of these bets. But one thing is certain, virtualization is here to stay and demand will only increase as corporations strive to be more efficient as they battle growth.

Bottom line

When analyzing Citrix and its report, one can clearly see that the company operates a sound business in a growth industry and has excellent management steering the ship. The question however is, does its business fundamentals support its current valuation? I think this is going to be the prevailing debate, not only for Citrix in particular, but for the entire sector as several of its peers such as VMware and F5 also sport inflated multiples. For that matter, the word "value" is not one that comes to mind when discussing stocks registering P/Es that of Citrix' (46). However, if I were to make an exception, this company would certainly qualify.