One of the more frustrating aspects of owning stocks is seeing them drop from time to time for what appears to be no reason at all. Investors in Motley Fool Hidden Gems selection Ceragon Networks
Stock in Ceragon, which makes network backhaul solutions, is even down almost 30% from when I called it cheap only a few weeks ago after its fourth-quarter results were released. Little has changed since that time, so you can guess my opinion now.
Fundamentally, the picture Ceragon offers has changed little, but the market's perspective has changed radically as the outlook for the economy gets bleaker by the day.
The situation with Sprint Nextel
But Ceragon has a very diversified customer base, with much of its revenue coming from international markets. In 2006, for example, roughly 38% of Ceragon's revenue came from Europe, the Middle East, and Africa, while 30% came from Asia Pacific and 26% from North America. With this diversity in global customers like Vodafone
At its price of about $6.50 per share, Ceragon is trading at only 15.9 times its 2007 diluted GAAP earnings per share. Company management expects net income to increase at a rate even higher than sales in 2008, so assuming that GAAP earnings grow by 30%, Ceragon's forward multiple is an attractive 12.2. Even though dilution from a share offering late last year will eat into EPS somewhat, Ceragon is still priced at a steep discount to its projected growth.
Ceragon Networks was selected by the Motley Fool Hidden Gems team for its great growth prospects. What other stocks have Tom Gardner and Bill Mann picked to beat the market? Take a free 30-day trial to see.
Fool contributor Dave Mock makes sure he eats his recommended allowance of fiber each day. He owns shares of Intel and is the author of The Qualcomm Equation. Sprint Nextel and Intel are Inside Value recommendations. The Fool's disclosure policy was framed and was never even present at the Watergate Hotel.