Today's winner : NetGear (NTGR)
About the Company :
NETGEAR, Inc. designs, develops, and markets networking products for home users and small businesses worldwide. The company’s products enable users to connect and communicate across local area networks and the World Wide Web; and share Internet access, peripherals, files, and digital multimedia content and applications among various networked devices and other Internet-enabled devices. Its product line consists of wired and wireless devices that enable Ethernet networking, broadband access, network connectivity, and network storage and security appliances.
Analysis
Netgear has been one of the best router companies in the computer Networking space. This company is highly cyclical and sensitive to the economic conditions.
To See One of the clear examples of its cyclical nature , we should go back as early as 2007-2008. During the beginning of recession when consumers and companies
cutback on investments, Netgear reversed to negative earnings growth in parallel with the Rest of the Economy. Now the economy has turned the corner and we see
increased consumer and corporate spending take over the arena. Its time to invest in companies of cyclical nature.
Here is the snapshot from recent Fourth quarter results announced on Nov 10.
You can see the primary business revenue exposure is in North America and rest in Asia. Even though Asia is booming we have always been on the top of Technology spending.
October 3, Percentage September 27,
2010 Change 2009
(In thousands, except percentage data)
North America $ 121,956 61.7 % $ 75,408
Percentage of net revenue 51.7 % 44.1 %
Europe, Middle-East, and Africa $ 89,120 22.8 % $ 72,590
Percentage of net revenue 37.8 % 42.4 %
Asia Pacific $ 24,941 8.1 % $ 23,073
Percentage of net revenue 10.5 % 13.5 %
Lets see the valuation of the company versus future guidance..(as of 02/07/2011)
Market Cap (intraday): 1.33B
Enterprise Value (Feb 8, 2011): 990.02M
Trailing P/E (ttm, intraday): 29.32
Forward P/E (fye Dec 31, 2011): 17.57
PEG Ratio (5 yr expected): 1.14
Price/Sales (ttm): 1.51
Price/Book (mrq): 2.77
Enterprise Value/Revenue (ttm): 1.15
Enterprise Value/EBITDA (ttm): 10.15
Lets compare the valuation
Valuation versus the Index and Telecom/networking space.
You can see that its way slightly undervalued compared to the telecommunications Equipments/network industry as a whole.
These are reasons that stock might outperform the rest of the industry .
1, Retailers (traditional and Online) posting high revenues across computer related products
2, The stock is selling for 17.57, which is low compared to estimated 18 % Growth rate.
3, High Demand for WIFI enabled devices boosting the need for Home/Office Networking bandwidth.
4, Reported 3rd qtr 2010 earnings of $0.45 per share on 10/26/10. This beat the $0.38 consensus of the 8 analysts covering the company.
Lets look at the Weekly chart
NTGR - Weekly Candlesticks: "
via StockCharts.com
"
The stock is on the consolidation mode this year and settled well above the 50 day average with Reduced volatility. I would see this trading above $50 in 6 months time frame..
My target price for NTGR is $45 in next few weeks if they beat the $0.47c consensus. (which they will easily).
One of the areas of concern is the Speed at which the Company comes up with New products and speed of Expansion in Asia
Happy Investing.
Note : If you like this article and like to share it , please provide a direct link to the Blog using Facebook,Twitter and other media sharing links . Also please recommend to your friends. Post a Comment if you are planning to use the article or contact me.
About the Company :
NETGEAR, Inc. designs, develops, and markets networking products for home users and small businesses worldwide. The company’s products enable users to connect and communicate across local area networks and the World Wide Web; and share Internet access, peripherals, files, and digital multimedia content and applications among various networked devices and other Internet-enabled devices. Its product line consists of wired and wireless devices that enable Ethernet networking, broadband access, network connectivity, and network storage and security appliances.
Analysis
Netgear has been one of the best router companies in the computer Networking space. This company is highly cyclical and sensitive to the economic conditions.
To See One of the clear examples of its cyclical nature , we should go back as early as 2007-2008. During the beginning of recession when consumers and companies
cutback on investments, Netgear reversed to negative earnings growth in parallel with the Rest of the Economy. Now the economy has turned the corner and we see
increased consumer and corporate spending take over the arena. Its time to invest in companies of cyclical nature.
Here is the snapshot from recent Fourth quarter results announced on Nov 10.
You can see the primary business revenue exposure is in North America and rest in Asia. Even though Asia is booming we have always been on the top of Technology spending.
October 3, Percentage September 27,
2010 Change 2009
(In thousands, except percentage data)
North America $ 121,956 61.7 % $ 75,408
Percentage of net revenue 51.7 % 44.1 %
Europe, Middle-East, and Africa $ 89,120 22.8 % $ 72,590
Percentage of net revenue 37.8 % 42.4 %
Asia Pacific $ 24,941 8.1 % $ 23,073
Percentage of net revenue 10.5 % 13.5 %
Lets see the valuation of the company versus future guidance..(as of 02/07/2011)
Market Cap (intraday): 1.33B
Enterprise Value (Feb 8, 2011): 990.02M
Trailing P/E (ttm, intraday): 29.32
Forward P/E (fye Dec 31, 2011): 17.57
PEG Ratio (5 yr expected): 1.14
Price/Sales (ttm): 1.51
Price/Book (mrq): 2.77
Enterprise Value/Revenue (ttm): 1.15
Enterprise Value/EBITDA (ttm): 10.15
Lets compare the valuation
Valuation versus the Index and Telecom/networking space.
 |  P/E (TTM) | P/E (Fwd 12 Mo.) | |||
|---|---|---|---|---|---|
NTGR | 21.4x | 17.3x | 1.08x | 23.6% | -0.3% |
Telecommunications Equipment Industry | 24.4x | 21.0x | -0.05x | 14.1% | 9.2% |
Technology Sector | 24.3x | 19.9x | -0.06x | 25.3% | 21.1% |
You can see that its way slightly undervalued compared to the telecommunications Equipments/network industry as a whole.
These are reasons that stock might outperform the rest of the industry .
1, Retailers (traditional and Online) posting high revenues across computer related products
2, The stock is selling for 17.57, which is low compared to estimated 18 % Growth rate.
3, High Demand for WIFI enabled devices boosting the need for Home/Office Networking bandwidth.
4, Reported 3rd qtr 2010 earnings of $0.45 per share on 10/26/10. This beat the $0.38 consensus of the 8 analysts covering the company.
Lets look at the Weekly chart
NTGR - Weekly Candlesticks: "
via StockCharts.com
"
The stock is on the consolidation mode this year and settled well above the 50 day average with Reduced volatility. I would see this trading above $50 in 6 months time frame..
My target price for NTGR is $45 in next few weeks if they beat the $0.47c consensus. (which they will easily).
One of the areas of concern is the Speed at which the Company comes up with New products and speed of Expansion in Asia
Happy Investing.
Note : If you like this article and like to share it , please provide a direct link to the Blog using Facebook,Twitter and other media sharing links . Also please recommend to your friends. Post a Comment if you are planning to use the article or contact me.
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