If you're not overly familiar with machine-to-machine (M2M), Internet of Things (IoT) provider CalAmp (NASDAQ:CAMP), you're not alone. With a market capitalization of $820 million CalAmp likely flies under many an investor's radar. But that could be good news for a couple of reasons. Despite a strong fiscal 2018 third quarter, a lack of love from analysts has left CalAmp's shares relatively undervalued compared to those of its peers.

Another upside to CalAmp's size is that, given the vast opportunity the IoT connectivity market represents, just a small piece of the pie would make a significant impact on its top and bottom lines. Given the expectation that some 23 billion connected "things" will be installed and functioning by the end of this year alone, CalAmp is positioned for growth: But is it a buy?

Two brokers reviewing computer screens full of financial data.

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What's not to love?

Since it reported its Q3 earnings on Dec. 21, CalAmp stock has been essentially flat. What makes that a bit of a head-scratcher is that CalAmp had another record-breaking quarter on total revenue and several other key metrics.

At $93.7 million, CalAmp's sales were 12% higher than a year ago. Earnings before interest, taxes, depreciation, and amortization (EBITDA) also hit an all-time high, skyrocketing 39% to $13.84 million. Excluding one-time items -- a fair representation, given that CalAmp received $13.3 million as part of a legal settlement last quarter -- earnings per share also enjoyed a meteoric rise.

In addition to top-line growth, CalAmp's operating expenses were flat in its Q3, which helped boost EPS by 48% year over year to $0.31 a share. Several big wins, as well as the further diversification of its global customer base, also enhanced its performance. International revenue climbed to $26.2 million, and now represents a record 28% of total sales.

Photo-shopped picture of several vehicles including a plane, bulldozer, train, and garbage truck all connected at multiple points.

Image source: Getty Images.

To CalAmp's credit, it's not trying to be all things to all people. Rather, it specializes in industrial IoT, and even more specifically, fleet management. And again last quarter, it took steps in the right direction in both niche markets.

Industrial giant Caterpillar is one of CalAmp's signature customers, and their relationship grows with each passing quarter. Its revenue from Caterpillar rose 24% sequentially to (you guessed it) another record of $13.2 million.

CalAmp inked a software-as-a-service (SaaS) fleet management deal with a "large state government agency" a couple quarters back, and started delivering on the new partnership last quarter. The company said the new agreement will add more than 5,000 subscribers over the next several quarters. Considering CalAmp's market cap, that could move the needle a bit all by itself.

This year kicked off with a bang, too: Last week, CalAmp announced an SaaS deal with the state of Pennsylvania to support its 11,000 vehicle fleet management efforts.

Playing with the big boys

Though CalAmp doesn't have to lead the IoT connectivity market to continue its outstanding growth, its efforts ensure it will bump heads with some big boys such as Cisco (NASDAQ:CSCO). For some perspective, revenues from Cisco's applications division, home to its IoT solutions, among others, rose 6% last quarter to $1.2 billion.

Going head to head with the Ciscos of the world is no easy task, which makes CalAmp's targeted strategy that much more critical. Thing is, as it demonstrated again last quarter, its focus on fleet and industrial IoT solutions is clearly working, whether analysts acknowledge it or not.

To buy, or not to buy

The bearish sentiment is one reason CalAmp stock is trading at a mere 17 times forward earnings, about one third of its 49 times trailing earnings ratio. Though it's not an apples-to-apples comparison, CalAmp's peers trade at an average of 35 times trailing earnings.

If it hits the midpoint of it's forecast revenue range of $91 million to $96 million next quarter, that will be a 9% increase in revenue compared to fiscal 2017's Q4. But don't be surprised if CalAmp once again delivers on the high end as it has for several periods.  

To sum up, CalAmp's presence in the right markets, its consistent growth where it counts, and its relative value add up to make it a definite buy, and a long-term growth investor's dream stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.