Another used to be loved stock which I would like to discuss is Acme Packet (APKT, Financial), which enjoyed wild advance of more than 25 times from $3.2 to $82.6 in the period of Dec 2008 and Apr 2011, then have suffered from free fall since then. Now the stock price is staying around $30/share. Is it the overreaction of the market to drive down the price to very cheap valuation or is it still the high price for the business intrinsic value?
APKT is the leading provider in session border control solutions which enable the delivery of interactive communication including voice, video and multimedia, and data services across IP, network borders. The company’s products and services have been delivered to more than 1270 end user customers in more than 100 countries. The end user customers include incumbent and competitive local exchange and long distance providers, international service providers, cable operators, internet telephony service providers, etc. APKT has the balance between the business in US and Canada versus internationally. And in the last 03 years, there are around two or three concentrated customers, who took more than 10% of total net sales, are Verizon business, Alcatel-Lucent and Nokia Siemens Networks.
Looking back on its operating history from 2004, it has grown quite fast. The top line kept increasing from $3 million in 2003 to $231 million in 2010, 77 times in only 6 years. The net income was fluctuating ups and downs, combined with the substantial shares issuance during the same period, which leads to not very impressive EPS results.
In terms of financial health, it is very liquid. The cash and short-term investments represent nearly 70% of its total assets. The D/A ratio stay at only nearly 13%, with no interest bearing debt. Even now with the market capitalization of $ 2.2 billion, the enterprise value is only around $ 1.7 billion.
Several days ago, the company hosted the conference call to discuss the most recent result of Q3 2011. In this third quarter, it was said that the business added over 80 new customers in this quarter, and now served over 1,525 customers in 107 countries. The enterprise customer bookings activity grew 72% year-over-year with 50 new enterprise customers and saw the number of deployments expansion. In this quarter, HP has integrated the company enterprise session border controllers into HP Unified Communications solutions portfolio. Besides, the same product solutions have been qualified in Microsoft Linked Server UC open interop program and APKT was the first enterprise class SBC technology to be qualified.
This product, session border controllers, has traditionally represented over 90% of the revenues, and it is expected to see the robust growth in three leading indicators, residential voice subscribers, enterprise SIP trunk and IP enabled mobile network. On full year outlook, the firm expected to have the total revenue to range between $315 million and $320 million, achieving the growth of between 36% and 38%. Non-GAAP EPS would be around $1.14 and $1.18, with the growth of 43% and 48%.
APKT has enjoyed the very high valuation over the last 05 years, ranging from 30x to 84x earnings, on average, the earnings multiple is 47x. The book value multiples and P/CF multiples are at the high level as well, 5.1x and 41x respectively. The extremely fast advance in the stock price has put the P/E multiples in 2010 up to 84x, the level that no value investors would dare to touch the stock. Even with its growth, the current valuation in the stock price is still equivalent to the 05 year average valuation. Personally, I think value investors should wait for more price depression before taking position in this stock.
This is the subjective viewpoint of the author, and it is not the recommendation to buy, hold or sell the stocks mentioned in this analysis. Anyone who wishes to buy, hold or sell the stocks has to do his/her own analysis at his/her own risk.
APKT is the leading provider in session border control solutions which enable the delivery of interactive communication including voice, video and multimedia, and data services across IP, network borders. The company’s products and services have been delivered to more than 1270 end user customers in more than 100 countries. The end user customers include incumbent and competitive local exchange and long distance providers, international service providers, cable operators, internet telephony service providers, etc. APKT has the balance between the business in US and Canada versus internationally. And in the last 03 years, there are around two or three concentrated customers, who took more than 10% of total net sales, are Verizon business, Alcatel-Lucent and Nokia Siemens Networks.
Looking back on its operating history from 2004, it has grown quite fast. The top line kept increasing from $3 million in 2003 to $231 million in 2010, 77 times in only 6 years. The net income was fluctuating ups and downs, combined with the substantial shares issuance during the same period, which leads to not very impressive EPS results.
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |
| Revenue | 16 | 36 | 84 | 113 | 116 | 141 | 231 |
| Net Income | -7 | 0 | 29 | 20 | 12 | 17 | 43 |
| Shares | 15 | 15 | 57 | 66 | 63 | 62 | 68 |
| EPS | -0.47 | 0 | 0.5 | 0.3 | 0.18 | 0.28 | 0.63 |
In terms of financial health, it is very liquid. The cash and short-term investments represent nearly 70% of its total assets. The D/A ratio stay at only nearly 13%, with no interest bearing debt. Even now with the market capitalization of $ 2.2 billion, the enterprise value is only around $ 1.7 billion.
Several days ago, the company hosted the conference call to discuss the most recent result of Q3 2011. In this third quarter, it was said that the business added over 80 new customers in this quarter, and now served over 1,525 customers in 107 countries. The enterprise customer bookings activity grew 72% year-over-year with 50 new enterprise customers and saw the number of deployments expansion. In this quarter, HP has integrated the company enterprise session border controllers into HP Unified Communications solutions portfolio. Besides, the same product solutions have been qualified in Microsoft Linked Server UC open interop program and APKT was the first enterprise class SBC technology to be qualified.
This product, session border controllers, has traditionally represented over 90% of the revenues, and it is expected to see the robust growth in three leading indicators, residential voice subscribers, enterprise SIP trunk and IP enabled mobile network. On full year outlook, the firm expected to have the total revenue to range between $315 million and $320 million, achieving the growth of between 36% and 38%. Non-GAAP EPS would be around $1.14 and $1.18, with the growth of 43% and 48%.
APKT has enjoyed the very high valuation over the last 05 years, ranging from 30x to 84x earnings, on average, the earnings multiple is 47x. The book value multiples and P/CF multiples are at the high level as well, 5.1x and 41x respectively. The extremely fast advance in the stock price has put the P/E multiples in 2010 up to 84x, the level that no value investors would dare to touch the stock. Even with its growth, the current valuation in the stock price is still equivalent to the 05 year average valuation. Personally, I think value investors should wait for more price depression before taking position in this stock.
This is the subjective viewpoint of the author, and it is not the recommendation to buy, hold or sell the stocks mentioned in this analysis. Anyone who wishes to buy, hold or sell the stocks has to do his/her own analysis at his/her own risk.
