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Broadband traffic is growing like a zombie infestation. Networking expert Cisco Systems (Nasdaq: CSCO ) predicts consumer Internet traffic quintupling from 2010 to 2015 for a 36% annual growth rate, led by emerging markets joining the party and high-definition video eating gobs of bandwidth. Business traffic isn't far behind with a 22% annual growth rate. Big data is everywhere.
This data boom creates tons of market opportunity for builders of network infrastructure. Cisco and Alcatel-Lucent (NYSE: ALU ) have their fingers in many large-scale builds regardless of the technology involved, with Juniper Networks (Nasdaq: JNPR ) sniffing around the occasional long-haul opportunity; Calix (Nasdaq: CALX ) is an underappreciated operator in telecom infrastructure, and JDS Uniphase (Nasdaq: JDSU ) offers plenty of fiber-optic help to that segment; while Arris Group (Nasdaq: ARRS ) is a big name in cable-based systems.
The opportunity here is so huge for a focused infrastructure builder that the Fool called Arris out as the best stock to own in 2011. We even dedicated a three-page free report to Arris, explaining in detail what's so great about the business. Go ahead and grab your copy now if you haven't already -- it's absolutely free and provides far more information than the little article you're reading now could possibly cover. I'll wait here until you get back.
And now, back to the show
By now you might be asking, "How come Arris investors are losing to a simple S&P 500 index so far in 2011 if the stock is so darn great?"
Fair enough. The company got off to a great start with a fine fourth-quarter report in February, and Arris shares were beating the market by a sizeable margin at the time.
But then the wheels fell off the stock after the first-quarter report, and Arris hasn't recovered since. There wasn't anything structurally or fundamentally wrong about that report or the second-quarter guidance it offered -- earnings and sales fell comfortably within the original guidance, though analysts were expecting slightly more, and the forecast also conformed to Street expectations.
Some of these drastic drops simply make no sense. This is one of 'em. In other words, as good as Arris looked at the start of 2011, it's an even deeper value now.
What to do now
Dumping Arris on a very slightly disappointing three-month outlook misses the forest for the trees. Dig deeper and you'll see the order backlog growing by 26% quarter-over-quarter to create a very favorable book-to-bill ratio of 1.14: The contracts are coming, just on longer terms than expected.
The product pipeline is packed with promising cash machines, including upgrades to Arris' existing installations of high-speed DOCSIS 3.0 systems and a new range of specialized handlers for video streams. The company also recently demonstrated an ultrafast method for combining several channels of existing cable pulls into a single connection, upstaging many fiber-optic systems. Arris is not getting left behind as broadband speeds accelerate -- it's actually a leader in that race.
As long as leading customers Comcast (Nasdaq: CMCSA ) and Time Warner Cable need faster and better networks, Arris will deliver what they need. There's always some competition with arch-nemesis Cisco and others, but Arris is holding its own and then some.
There's no question in my mind that Arris has a lot of business going on -- and that the stock isn't getting enough credit for it. You can buy shares today for less than 0.9 times trailing sales, taking the strong balance sheet into and netting out its cash balance. If Arris was a great buy in January, it's even better today as you get to buy in at a cheaper price with the business case still intact.
Learn more about Arris and its tremendous growth drivers by grabbing that free report we talked about already. In case I'm already preaching to the choir, you can simply add Arris to your Foolish watchlist to stay on top of news and analysis of this stock -- or any other ticker you'd choose to watch.