F5 Networks (FFIV, Financial) is on a great run this year. The company has managed to outperform peers like Cisco (CSCO, Financial), thanks to its consecutive earnings beat and a swift transition to a new business model. The company should continue gaining traction this year as it has multiple revenue sources. Let’s take a look at the company’s initiatives that, I believe, will reward long-term investors.
Growth plans
In services business, F5 is believed to be a market leader in the virtual edition ADC market, enabled by its unique capability to offer solutions just like virtual software deliveries, which are software only deliveries throughout all the key hypervisors and exclusive orchestration facility in BIG IQ to allow customers to shift towards NFV architectures and software-defined data centers.
Further, robust attach rate of software modules, virtual ADC sales and GBB pricing together have resulted in notable software development. F5 had recorded several major project wins with its key security solutions during the previous quarter. In addition, it has won and started the production at a key AFM Gi firewall project for a Tier 1 service provider in North America. F5 also registered strategic wins with its traffic to LTE solution that include license upgrades given LTE traffic enhanced in the installed base. Moreover, Gi integration traffic steering adjustments are also notable growth drivers for F5 in the service provider market.
The significant deal wins by F5 in the services business segment along with an accelerated acceptance of its innovative product and services offerings highlight the effective growth strategy of F5 in line with the customer desires.
F5 estimates to witness robust demand for its growing security solutions portfolio with the customers keen on adopting hybrid architectures, launching applications both in cloud and in the premise.
F5 introduced its Silverline hybrid application plan in November with the early launch that includes its phishing protection and anti-malware services and subscription based DDoS service. F5 improved its Silverline services platform with its superior WAP abilities. This key strategy coupled with the unique advantage of its partner ecosystem in verticals such as SPN allow F5 to capture unique opportunity to enable its customers with exclusive competitive advantage and highest flexibility by shifting towards innovative technology architectures.
The continued solid demand for a unique portfolio of security solutions for F5 is believed to be continuously supported by new and exclusive additions of innovative security features by the company to its portfolio of security solutions.
Further, the company’s robust portfolio of cloud services and application products is expanding significantly and thus hugely growing its addressable market and enhancing the revenue stream types accessible to its partner channel and sales force.
Conclusion
Overall, the investors are advised to invest in the F5 Networks looking at the impressive valuations with the trailing P/E and forward P/E ratios of 26.10 and 16.83 respectively. The PEG ratio of 1.21 suggests that the company growth is not at all expensive. The profit margin of 18.92% is attractive for the key stakeholders. More importantly, F5 has a solid balance sheet with nil total debt level and significant total cash of $666.47 million, encouraging the company to plan for future growth investments.
