Each year, we take a look back in order to look ahead. We do this by industry, by trend, and ultimately by stock. Here's a closer look at Acme Packet
Foolish facts
|
Metric |
Acme Packet |
|---|---|
| Motley Fool CAPS stars (out of 5) | ** |
| Total ratings | 441 |
| Percent bulls | 86.6% |
| Percent bears | 13.4% |
| Bullish pitches | 48 out of 53 |
| Highest rated peers | Digi International, Spirent Communications, Network Engines |
Data current as of Dec. 30.
Acme Packet looks like the sort of stock you expect would make a short-seller salivate. Not only is the stock priced at more than 100 times trailing normalized earnings, but also its customers are telecom carriers and equipment makers. Alcatel-Lucent
And yet there's no denying the usefulness of the company's session border controllers. They're essential equipment for establishing and maintaining the sort of voice-over IP calls you'd make with Skype or Google Voice.
Looking back to look forward
With that sort of market position, you'd think there would be a fair amount of the enthusiasm for the stock here in Fooldom. You'd be right, but only because the rise of VoIP was a major theme in this year's tech coverage at Fool.com:
- Every rich market attracts competitors, and the SBC market is no different. In June, Sonus Networks
(Nasdaq: SONS) - Was Rich going too far? Maybe, but the proof is in the customer signings. In November, Acme Packet landed a good one: Sri Lanka's Etisalat Lanka, a subsidiary of UAE-based Etisalat Telecommunications. Investor buying in the wake of the news pushed Acme Packet shares up more than 10% in late trading.
- Institutions piled in a month later, and stock -- already a four-bagger over the past 52 weeks -- is now on the verge of ending 2010 as a five-bagger.
But that's understandable. Acme Packet's financial performance reveals strong growth across the board as if demand for its pioneering SBCs has accelerated:
|
2009-2010 Quarterly Performance |
Q4 2010 |
Q1 2011 |
Q2 2011 |
Q3 2011 |
|---|---|---|---|---|
| Revenue growth | 34.9% | 64.7% | 62.3% | 55.8% |
| Normalized net income growth | 66.4% | 200.5% | 289.9% | 218.1% |
| Gross margin | 80.4% | 80.8% | 82.0% | 81.5% |
| Return on capital | 8.9% | 15.2% | 15.8% | 15.3% |
Source: Capital IQ, a division of Standard & Poor's.
And here's what analysts expect from Acme Packet over the next two years, according to data compiled by Capital IQ:
|
Capital IQ Estimates |
2011 |
2012 |
|---|---|---|
| Revenue estimate | $293.4 million | $384.8 million |
| Normalized profit per share estimate | $1.03 | $1.35 |
Source: Capital IQ. Data current as of Dec. 30.
Foolish outlook: bullish
Growth is the primary theme here. Acme Packet is on track to grow per-share earnings 80% over the next two years -- from $0.75 a share to $1.35 a share. The stock may trade for a premium, but that's only because the growth supports it.
Also, consider the market. Infonetics Research, a telecom market research company, estimates the cumulative revenue from SBCs will exceed $2.5 billion between now and 2014, and also that demand for SBCs will increase 44% annually over the same period. With Acme Packet's revenue still lingering at less than $300 million, there's plenty of room for the company to grow beyond its present valuation.
Now it's your turn to weigh in. What do you think of Acme Packet's prospects at current prices? Use the comments box below to explain your thinking. You can also rate Acme Packet in Motley Fool CAPS.
What will be next year's best stock? The Motley Fool has created a brand new free report called "The Motley Fool's Top Stock for 2011." In it, we reveal the little company set to profit from the broadband Internet expansion. Get instant access by clicking here -- it's free.
Interested in more info on the stocks mentioned in this story? Add Acme Packet, Alcatel-Lucent, Nokia, Sprint Nextel, or Sonus Networks to your watchlist.
