F5 Networks (FFIV, Financial) came entered fiscal 2015 with a good improvement in the revenue. However, the revenue numbers fell shy of the company’s expectations as it was anticipating better results on revenue. But the company is now optimistic about the positive growth in the market. It has many large deals in the pipeline which it thinks is encouraging. F5 is optimistic about this, and it expects to see a good resumption of a recent trend towards larger deals in the second quarter. The software market is also booming which might be one of the key growth drivers for F5 in future. Let us have a look.
A bright future
If we look closely, though, the company posted an increase in revenue yet it didn’t come up as expected. The sales in the first quarter were not up to the mark clearly reflecting the seasonal impact. But F5 is optimistic for a better performance in 2015 on the back of number of large deal opportunities and continued momentum that it is seeing from its key growth drivers. Counting on such a success, F5 is expecting sequential and year-over-year growth in second quarter.
F5 is expecting big things from the software industry. The software industry is growing and the company expects a boom in it in the near future which will give it ample opportunities for a better performance in the future. The company is pleased with the progress it is seeing with its initiatives. To make its products more competitive it is making attractive introductions in its hybrid application strategy. Under this, it has brought in Silverline which is seeing good traction in the market. In addition, F5 has also added significant functionality to its orchestration and management product BIG-IQ. This is a wise step by the company as it is playing a key role in winning the strategic security wins.
Trying to grow
It is also putting efforts for penetrating in the market more to explore more growth opportunities. Under this, it is moving aggressively in establishing SDN partnerships in technology. It is expected to move well with its security solutions. It is seeing strong customer adoption in its Best category which is a good sign. All of its sales strategies namely good, better and best are showing up well with good customer adoption. F5 is expecting better sales from the software segment as it seeing growing customer demand for hybrid solutions.
It is a good growth opportunity for F5 as the company is already well in position to meet this growing demand. Further, this will allow greater flexibility in the deployment of application services within and across data centers and into Cloud. On the other hand, its security business is also expected to be a major contributor to its growth story. It is mainly because of the growing sales across its security solution portfolio that includes ASM, APM and AFM.
Conclusion
Moving to the fundamentals, the stock looks reasonable with a trailing P/E of 25.66, and the forward P/E of 15.68 shows good earnings growth in the near term. The profit margin of 18.58% is also strong and will surely help it to gain market share in future. All these valuation levels are favorable and indicating good improvement in earnings. I would like to suggest the investors definitely pick F5 Networks.
