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Bull of the Day: Sonus Networks (SONS)

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Tech is one of those sectors of the market that’s just always going to be leading the way. Almost by definition tech stocks are going to be growthy and expanding into new markets. That’s exactly the sort of thing you should be looking for when figuring out where to invest your hard-earned money for the long-term. Today’s Bull of the Day is a company that’s trying to expand the voice and data network globally.

Sonus Networks provides networked solutions worldwide. The company offers Session Border Controllers (SBCs) that address security and interworking requirements for small, medium, and large businesses, as well as regional and global communications service providers; Sonus GSX9000 Open Services Switch, which bridges IP and TDM networks by converting voice signal into Internet Protocol (IP) IP packets and transmitting those IP packets on a data network; and Sonus T7000 Intelligent Switching System, a class five end-office soft switch that provides residential and business voice services, as well as IP-IP multimedia processing engine services.

The stock is a Zacks Rank #1 (Strong Buy) in an industry that ranks in the Top 15% of our Zacks Industry Rank. A big reason for the favorable Zacks Rank is the recent earnings estimate revisions to the upside the company has seen from analysts. Over the last thirty days, three analysts have increased their estimates for the current quarter while two have done so for the current year. The bullish sentiment has increased our Zacks Consensus Estimate for the current quarter from 16 cents to 23 cents while increasing current year estimates from 23 cents to 27 cents.

Another boost for bullish shareholders comes from Sonus Network’s valuations. Looking at its price to sales ratio, SONS is only trading 1.5x sales. Compare that to the S&P 500 average of 3.0x earnings and you see why some feel SONS is undervalued here.

The stock chart has been pretty choppy over the last year, moving from under $5.60 prior to Election Day to over $8.60 in May. The latest bullish run has come after the stock pulled back to the 50-day moving average last week down near $7.20. Now the stock is testing the top-end of the range, threatening to breakout to new highs ahead of its next quarterly earnings report due out October 30th.

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