F5 Networks (FFIV) is on my radar. The company is in the business of connecting your network so it works effeciently. F5 is like a young Cisco systems.
One-Year Chart
FFIV has corrected in 2011 after going from $23 to $130 during 2009-2010. With a run like that you have to ask “why didn’t we own it then?” The asnwer is this company is tough to grasp. Its complicated networking equipment.
Right now the stock looks great. I’d like to buy if but were are in a correction that’s taking down even the best stocks. I feel if I buy FFIV now the stock could fall.
FFIV beat by 3 cents last quarter, making profit growth 57% vs the 52% expected. Next quarter’s profits are supposed to be up 38%, so unless FFIV beats by a bigger margin profit growth will be in the 40% range. Good for a P/E of 30.
Earnings Table
The best thing about the Earnings Table is profits come in at an all-time high every time FFIV reports. Over the last 8 quarters, F5 Networks has made:
$0.40
$0.50
$0.52
$0.56
$0.66
$0.79
$0.88
$0.88
and is expected to make:
$0.91
$0.97
$1.03
$1.06
the next four quarters. Record profits in consecutive quarters shows a solid business model. I have a lot of trust in this company.
GOing through the annual reports, FFIV has a difficult earnings picture to digest. Many 10-k’s had different sets of earnings, and i was forced to pick one. One year the standards changed and I was forced to switch to a more favorable view of the profits (I think this was 2007 as profits went from $0.80 the year before to $1.44). The good thing is profits have grown every year as the ten-year chart shows.
Fair Value
Its fair to say this company is worth 35 times earnings. Mayeb 40 times but I dont know enough about FFIV to give it that rich of a valuation. With a P/E of 35 this $102 stock has a fair value of $150 next year. Pretty decent but not huge upside. FFIV usually ups estimates a little bit each quarter.
Bottom Line
F5 Networks is one of the top stocks in the market. I’ll try to put FFIV in the Growth Portfolio in the coming weeks. I like this stock a lot.
