Peers for Polycom include Cisco Systems, Inc. (NASDAQ:CSCO), Citrix Systems, Inc. (NASDAQ:CTXS), Riverbed Technology, Inc. (NASDAQ:RVBD), and Juniper Networks, Inc. (NYSE:JNPR). There is a substantial gap in how these companies are valued in the market: Citrix, Riverbed, and Juniper also carry high valuations in relation to their trailing earnings, in the sense that each has a trailing P/E of 40 or higher. Wall Street analysts expect that Riverbed and Juniper will see dramatic improvements in their net income over the next two years, resulting in much more attractive forward P/Es, but we would be skeptical of this degree of optimism. Citrix is also expected to grow its earnings, though while revenue was up strongly in its most recent quarter compared to the same period in the previous year bottom-line growth was limited. Cisco, meanwhile, carries trailing and forward P/Es of 12 and 10 respectively. While it may not have the same prospects as these other companies, it has been growing its business recently and looks like a much more attractive value stock.
It’s notable that Cooperman and his team have been adding shares of Polycom, but we think that we would avoid the stock for now. The market is already pricing in high expectations for the company, despite the fact that at least recently its business has been on a downward trend. Cisco in particular seems like a better prospect for further research.
Disclosure: I own no shares of any stocks mentioned in this article.