Since its IPO back in December, shares of Double-Take Software (NASDAQ:DBTK) have largely languished. That hasn't deterred the Motley Fool CAPS community, which has given the stock a five-star rating. Double-Take Software develops technologies to help companies recover from computer meltdowns, and CAPS investors seem to think this should be a growth business for the long haul.
CAPS' take
CAPS member johnnneyye gets to the point: "This is just a well run company and still has an attractive P/E ratio. It's a buy buy buy."
CAPS member phonixed has similar sentiments:
The company is nested in a very competitive sector. It's up against Computer Associates (NYSE:CA), though a beat-up company and stock, and a few other industry names that offer stiff competition. However, DBTK has one of the highest operating margins among industry competitors at 13.39%, and its gross margins are respectable in the high 80s. The company is making a lot of cash...
My take
In fiscal Q1, Double-Take's revenues spiked 67% to $17.9 million, and license revenue rose 63% to $10.4 million. That license revenue not only promises ongoing fees in the future; it also indicates the growing popularity of the company's software. Double-Take is also enjoying success through major resellers such as Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL).
Double-Take's software constantly replicates data throughout an entire organization's computer network, storing the backups on remote servers. In the event of a data meltdown, it's easy to bring the systems back up to speed. The software also works seamlessly with business-critical applications such as Microsoft's (NASDAQ:MSFT) Exchange Server and SQL Server.
Double-Take's solutions come with several key growth drivers, including corporate America's increasing reliance on digital systems and the tough regulatory environment arising from laws such as Sarbanes-Oxley, HIPAA, and others, which require companies to keep better copies of their records.
Trading at four times revenue, Double-Take's valuation looks reasonable in light of its growth rate. As security grows ever more important in corporate America, the future looks promising for this firm.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,831 out of 30,414 in CAPS. The Fool has a disclosure policy.
