Why I’m Adding NetGear, Inc. (NTGR) to My Personal Portfolio

What’s more, while the folks at the $129-billion behemoth that is Cisco Systems, Inc. (NASDAQ:CSCO) have already largely spread their influence in every significant market across the globe, the comparatively tiny Netgear is only just beginning to expand its presence in fast-growing markets like China, India, and Russia through newly introduced products created specifically to target the expanding number of middle-class consumers in those regions.

We should also note that NetGear, Inc. (NASDAQ:NTGR)’s management assured investors last quarter that they’re back “in full swing” after their recent challenges, and the company did manage to stay profitable all the while despite its missteps. Better yet, at the end of last quarter, Netgear boasted no debt and $422.4 million in cash on its balance sheet, good for roughtly one third of its entire $1.3 billion market cap.

Remember, however, Netgear’s cash balance will be reduced in the current quarter by the payment of the AirCard acquisition, which amounts to roughly $140 million.

Even so, shares of NetGear, Inc. (NASDAQ:NTGR) currently look like a bargain, as they trade for just 16.4 times last year’s earnings, and only 11.1 times next year’s estimates. Incidentally, that’s even lower than Cisco Systems, Inc. (NASDAQ:CSCO)’s already-low forward P/E of 11.5 — not too shabby for a small growth company whose market cap is around one hundred times the size of its mammoth competition.

Better yet, if you back out Netgear’s cash after the cost of the AirCard payment, its trailing and forward earnings multiples drop to just 12.6 and 8.6, respectively. Assuming Netgear can deliver on its promise for earnings and revenue growth going forward, I’m convinced this stock is simply far too cheap to pass up.

In the end, that’s why I’ll soon be adding NetGear, Inc. (NASDAQ:NTGR) to my personal portfolio, and why I believe long-term investors who follow suit will be handsomely rewarded for their patience.

Fool contributor Steve Symington owns shares of Apple. The Motley Fool recommends Apple, Cisco Systems, Inc. (NASDAQ:CSCO), and NetGear, Inc. (NASDAQ:NTGR). The Motley Fool owns shares of Apple.

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