Recently, Infoblox Inc (NYSE:BLOX) jumped as much as 15% after impressive third-quarter earnings results. Shareholders of Infoblox Inc (NYSE:BLOX) must be very happy as its share price has increased around 40% since the beginning of the year. Should investors buy Infoblox after its recent spike? Let’s find out.
Improving third-quarter results
In the third quarter, Infoblox Inc (NYSE:BLOX) generated around $58 million in revenue, 33.6% higher than last year. Most of its revenue, $33.6 million, or 57.9% of the total revenue, was generated from sales of products and licenses while services revenue was $24.4 million. The net loss was down substantially, from $1 million in Q3 2012 to only $257,000 in Q3 2013. The non-GAAP net income came in at $6 million, or $0.11 per share. For the fourth quarter, Infoblox Inc (NYSE:BLOX) expects to generate around $58-$59 million in revenue and around $0.08-$0.09 per share in non-GAAP EPS.
Wall Street is getting bullish
Infoblox has quite a strong balance sheet. As of April 2013, it had more than $170.7 million in shareholders’ equity, nearly $192 million in cash and short-term investments, and no debt. With only $32.7 million in goodwill, the tangible book value stayed at $138 million. At $25 per share, Infoblox is worth around $1.25 billion on the market. The market seems to value the company quite expensively at more than 5.3 times its sales.
However, Wall Street seems to be quite bullish about the company after the improvement in third-quarter earnings. UBS recommends Infoblox as a buy with a target price of $28 per share as the company was in the early phase of its core DDI products, with 75% of the total revenue being recurring sales. Needham believes that if the EPS could reach $1.32 per share, its P/E would be only nearly 16.7 while the P/S would be only 3.9.
The cheapest P/S ratio among peers
Compared to its peers Check Point Software Technologies Ltd. (NASDAQ:CHKP) and Sourcefire, Inc. (NASDAQ:FIRE), Infoblox Inc (NYSE:BLOX) has the lowest price/sales ratio. Check Point Software Technologies Ltd. (NASDAQ:CHKP) is a global leader in Internet security. Most of its revenue, $653.5 million, or more than 60.5% of the total revenue, was generated from software updates, maintenance, and subscriptions, while products and licenses sales came in at 444.4 million in 2012.
In the beginning of May, Check Point Software Technologies Ltd. (NASDAQ:CHKP) introduced 600 Appliances to prevent viruses and malicious websites from attacking small businesses. Interestingly, the company mentioned that its new 600 Appliances could be set up and managed easily by people with no IT background with a simple web-based user interface. Dorit Dor, Check Point’s Product VP, said: “With limited resources, small businesses are often not equipped to deal with the expert cybercriminal. The 600 Appliances solve this problem and offer small businesses an inexpensive, yet comprehensive security solution that provide secure access to critical resources anywhere anytime, while minimizing the risk of a data breach.”
Check Point is trading at around $50 per share, with the total market cap of around $10 billion. The market values the company at 13.24 forward earnings but as high as 7.3 times its sales.
Sourcefire, Inc. (NASDAQ:FIRE) is in the business of intelligent cyber security technologies, providing Network Security and Advanced Malware Protection products to a diverse customer base. Its biggest customer, EC America, represented around 19% of its total revenue. According to the company, EC America, a subsidiary of immixGroup, is the distributor of Sourcefire, Inc. (NASDAQ:FIRE)’s products to the U.S. government.
Recently, the company announced the addition of malware trajectory capabilities Network File Trajectory and Device Trajectory features to its Advanced Malware Protection portfolio, so that its customers could detect suspicious files and control outbreaks of malware. The market values the company at as high as 45.5 times its forward earnings and 7.3 times its sales.
My Foolish take
The fast growing Infoblox Inc (NYSE:BLOX) has the lowest price-sales ratio multiple compared to both Check Point and Sourcefire. However, Infoblox should keep innovating itself to maintain its rapid revenue growth rate. Among the three companies, I still like Check Point the most with its global leading position in Internet security. With a 12.7 % market share, Check Point ranked second in the security market, only behind Cisco Systems, Inc. (NASDAQ:CSCO).
The article Wall Street Is Bullish on This Fast Growing Tech Stock originally appeared on Fool.com and is written by Anh Hoang.
Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Check Point Software Technologies and Sourcefire. The Motley Fool owns shares of Check Point Software Technologies. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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