Sierra Wireless (SWIR, Financial) delivered strong improvement in its results in the recently reported quarter. With strong 28% year over year revenue growth, Sierra is looking well-positioned for the future. The main reason behind its commendable performance is the strong contribution from its acquired businesses and solid growth across the organic segment. All these positive signs are a clear indication that Sierra can improve further.
Moving in the right direction
Besides the positive results in the recently reported quarter, Sierra is also seeing a commendable growth in the profitability and leverage. A 249% year-over-year improvement shows that Sierra has a long way to go. This is leading the company to generate healthy cash flows which is further improving its margins. Acquisitions have played an important role in Sierra’s growth story in the third quarter. It is now largely focused on pursuing strategic opportunities which can further help it to accelerate its growth and enhance its market position.
Sierra is benefiting well with the strong contribution from some of its key segments such as automotive, transportation, energy and sales and payment and mobile business. The main reason behind this contribution is several design wins that the company is getting. Considering the market growth, Sierra is expecting several design wins from market segments also including energy, automotive enterprise networking, mobile computing and insurance Telematics.
Design wins in focus
The design win that the company already secured are expected to expected to bring new programs to not only to the existing customers but also will attract new customers which will ultimately increase the customer base of Sierra which will contribute to its growth momentum and financial performance. In addition, The Company has recently announced a design win with Itron which is a global leader in smart metering. This leader is again interested in Sierra’s AirPrime embedded modules which is a good opportunity for Sierra as it will open its way for smart grid solutions for the utility customers across the world.
Not only domestically but Sierra is soaring high on the international fronts as well. In Europe, its Insurance Telematics team is working very closely, it has recently entered in to deal with Octo Telematics to provide wireless connectivity. In the automotive segment as well, Sierra has also secured new design wins.
The company is also seeing good opportunities as the market is continuously transitioning from 2G to 3G and 4G technologies. Sierra is in a good position to capture this opportunity. It has also introduced a new HL line of central products and it is pleased to see the response it is seeing by the customers in the market. This will again shape Sierra’s position in the market.
Conclusion
It is interesting to see that the company’s earnings are growing well in the near term which is clearly evident by a solid forward P/E of 33.70. Moreover, the long term prospects of the stock also looks strong as its earnings are growing with a CAGR of 96.20% which is far better than the industry average of 16.52%. Thus, in my opinion I would like to suggest the investors to definitely pick Sierra Wireless as its prospects looks strong.
