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Bull Of The Day: Cambium Networks (CMBM)

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Cambium Networks (CMBM - Free Report) is a Zacks Rank #2 (Buy) and it is a growth stock.  It has an A for Growth and a D for Value.  CMBM has a wonderful chart and a great growth story, but the fact that the stock dropped when there was a stock offering is while I selected this stock to be the Bull of the Day.  Buyers of the dip, rejoice!  This is one dip that you need to look into.

Secondary

Last week the company announced that a shareholder would be selling 2.5M shares.  This was received poorly, but the stock rallied from down around 10% to back to break even.  About a month ago there was a shelf offering by the company where they company might raise up to $25M (or about 1M shares) and a shareholder would be selling 5M shares.

The stock was at 22 at the time of the announcement and it has rallied big time even as the market knew there was a good size seller coming.  Then the market learned that the seller is hitting for half of the amount and the stock opened lower… but that attracted buyers.  This tells me that the offering won’t have too much trouble being placed in the hands of institutional shareholders.

Part of the reason for this is the good growth and great chart.

Earnings History

Excellent history of beating the number.  I see 4 straight beats with one big one 3 quarters ago.  That skewed the average higher a little bit to 137% -- but most of the beats are in the 60% range.

Earnings Estimates

This is what I love to see, estimates ticking higher throughout the quarter.  This quarter has seen the number move from 17 cents to 20 cents to 26 cents.  That is just great.

Next quarter has seen the number move from 12 cents to 13 cents to 15 cents and is now at 21 cents.

The Rank cares more about the annual numbers and they are seeing the same thing.  On top of that there is earnings growth of more than 20%.

Valuation

So you have to pay up for this growth… but I love this spot to be grabbing it.  A forward PE of 32x is a lot as I the 13x price to  book, but the growth is huge here.  66% this year and 33% is expected for next year… and that number will probably end up being closer to 50% than 66%.

Margins are low now, but they are moving higher.  I see gross margins at 50% and they could easily move to 70% down the road.  Operating margin was -2% 2 quarters ago and was +3.6% in the most recent quarter.  That is what we love to see as it will drive earnings higher.

Chart

 

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