Cogent has gotten torched over the last six months - since July 2025, its stock price has dropped 55.8% to $23.14 per share. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Cogent, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is Cogent Not Exciting?

Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons we avoid CCOI and a stock we'd rather own.

1. Weak Growth in Total Connections Points to Soft Demand

Revenue growth can be broken down into changes in price and volume (for companies like Cogent, our preferred volume metric is total connections). While both are important, the latter is the most critical to analyze because prices have a ceiling.

Cogent’s total connections came in at 118,279 in the latest quarter, and over the last two years, averaged 2.8% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability.

2. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Cogent’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Cogent burned through $186.7 million of cash over the last year, and its $2.37 billion of debt exceeds the $226.3 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Cogent’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Cogent until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

Cogent’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 10.2× forward EV-to-EBITDA (or $23.14 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.

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