F5 Networks' (FFIV, Financial) strong second-quarter results for fiscal 2015 clearly indicate the happening growth in the technology industry. The company was impressive with good year-over-year growth in the revenue mainly due to the contribution from the rebound of total dollar deals greater than $1 million. However, F5’s sales growth in EMEA and APAC disappointed the investors with a marginal decline. The management thinks dollar fluctuation to be a key reason behind this decline. There are many other bright spots that F5 has pinpointed and is working to grow its performance in future. Let us have a closer look.
The catalysts
There is definitely a boom in the technology industry. This has contributed to F5's growth. If we look at the last five-year stock performance, F5 is impressive and the recent trends show that the stock has definitely got much room for growth in future. In fact, the company is also focusing on various other initiatives that could help it in the same. F5 is confident about a good growth in the sales as it is receiving more orders as compared to the last quarter. This growth in the orders is mainly due to F5’s cutting edge Gi firewall solutions, which are received by the customers positively.
Since the company got many new orders, which are indicating a promising long term growth prospect for F5 Networks. It is optimistic about the performance of its security business. as it is seeing solid growth opportunities in the service provider market. As the industry is growing, customers are more likely to adopt hybrid architectures, as security remains the prime concern for everyone nowadays. F5 thinks that its solid product portfolio, it is in a good position to quench the demand in future.
In response to these efforts, F5 has already launched Silverline application strategy and it is now extending its Silverline platform to have a bigger share of the pie. Recently, F5 has also developed a new WAP which is built on F5’s very own industry leading ASM solution. This can be a good growth driver to it, as this new addition to F5 Silverline’s Cloud-based application platform is proving attractive to the customers, as it is offering them with leading WAP services, in both premise and subscription-based Cloud offerings. In addition, it can also attract large organizations as it provides services to confidentially incorporate Cloud resources while protecting apps and data from security attacks and other risks.
So the prospects looks quite shaky, but F5 Networks is moving in great fashion and thinks that it could sustain any headwind lately. Further, there are some other solid points that are pointing out a bright future.
Conclusion
Now moving to the fundamentals, the stock is reasonable with a trailing P/E of 26.24 while the forward P/E of 16.94 shows smooth earnings growth in the near term. Again, the stock can attract investors with a profit margin of 18.92%. So, considering these valuation levels, F5 Networks looks like a good investment option now. But investors are urged to invest in the stock only in short term, as its long-term prospects don’t look strong.
