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Radware Ltd. makes integrated networking solutions worldwide. Its solutions include application delivery and network security solutions. The company offers the Alteon Application Switch application delivery controller that supports local and global load-balance, application acceleration, multi-homing network load-balance, and bandwidth management capabilities. Its AppDirector Intelligent Application Delivery Controller is for data center optimization and granular packet classification to eliminate traffic surges, server bottlenecks, connectivity disconnects, and downtime for business continuity. Radware Ltd. was founded in 1996 and is headquartered in Tel Aviv, Israel.
Radware Meets or Beats the Estimate over Last Two Years
Radware has met or topped earnings estimates in each of the last eight quarters. While there was only one analyst in the last seven of those quarters, the two year run is impressive. Over the last seven quarters the company has beat the Zacks Consensus Estimate by an average of a little more than one cent. As a result, the stock has moved higher on average by 4.6% following the last seven earnings reports.
In the September 2011 quarter, the stock rose nearly 12% following a 3.7% positive earnings surprise. The company reported earnings of $0.28, $0.01 more than the Zacks Consensus Estimate and 47% higher than year ago levels. Revenues of $42 million were in line with the Zacks Consensus Estimate and 13% higher than the year ago period.
Radware Most Recent Reported Earnings
On May 1, 2012 Radware reported revenue of $45 million, roughly $1 million ahead of the Zacks Consensus Estimate and up from $39 million reported in year ago quarter. In addition, earnings per share came in at $0.33, $0.04 higher than the Zacks Consensus Estimate of $0.29. The beat of 13.8% helped to propel the stock higher by about 2% in the session following the release.
Radware Sees Estimates Moving Higher
Radware has seen earnings estimates for 2012 move higher recently, with a big jump coming after the recent earnings announcement. The Zacks Consensus Estimate was calling for EPS of $1.34 in January 2012 and was bumped up to $1.39 in February. Another penny was added in April just prior to earnings bringing the estimate to $1.40. Following the recent earnings release, the Zacks Consensus Estimate jumped to $1.53, an increase of 9.2%. Similarly, estimates for 2013 also jumped following the recent earnings release. In April, the estimate stood at $1.64 and following the earnings release it moved to $1.79, an increase of 9.1%. The implied growth rate of earnings for Radware from 2012 to 2013 is approximately 17%.
The valuation for Radware trades at lofty 32x trailing twelve months earnings when compared to the industry average of 17x. The forward PE multiple of 25x is more palatable when compared to the 15x industry average, but still a solid premium. The price to book multiple of 3.3x is just below the industry average of 3.8x and the price to sales multiple of 4.6x is stronger than the 3.4x industry average.
The price and consensus chart shows us how Radware has followed the earnings estimate expectations over the last few years. More recently, the gap between earnings estimates and the stock has become significant. When the earnings estimates lines are well above the stock price this is an indication that the stock is undervalued. Aggressive growth investors tend to look for situations where the earnings growth has not yet been appreciated by the rest of the market, and RDWR's 17% implied growth rate suggests the stock has room to run. Radware is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
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