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Aruba Networks, Inc. (ARUN), Ruckus Wireless Inc (RKUS), Ubiquiti Networks Inc (UBNT): No Bargains in Wi-Fi Solutions Providers

As with the group, earnings growth has stalled with analysts now expecting a drop in fiscal year 2013 and fiscal year 2014 only roughly matching the 2012 earnings of $1.09. Even without earnings growth, the stock trades for nearly 18 times those forward earnings and over 4 times revenue.

Bottom line

As with all telecommunications solutions providers, the revenue is dependent on carriers with weak balance sheets and constant periods of pushing out deployments. The demand for Wi-Fi solutions should only grow over time, but it doesn’t appear that any of these stocks are worth paying up for that growth. All three stocks expect limited earnings growth over the next couple of years while in most cases growing revenue. This scenario shows the industry is overly competitive from either a stronger Cisco Systems, Inc. (NASDAQ:CSCO) in the case of Aruba Networks, Inc. (NASDAQ:ARUN) or counterfeiting in China with Ubiquiti Networks Inc (NASDAQ:UBNT). Investors should avoid this sector for now.

The article No Bargains in Wi-Fi Solutions Providers originally appeared on and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Ruckus Wireless. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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