Ceragon Networks - A High Capacity Stock

Aug. 6.07 | About: Ceragon Networks (CRNT)

Ceragon Networks (NASDAQ:CRNT), based out of Israel, have found their way to profitability with impressive and accelerating growth. The company manufactures wireless networking systems and antennas for mobile infrastructure.

They are working on major WiMax projects (think of a wireless network at your home or business except that it covers an entire city) and working to help increase the wireless bandwidth limits for PCs and cellphones so that it is possible to stream voice, video and data at high speeds. This "triple play" and the increasing need for massive amounts of bandwidth really starting to explode bodes very well for the future prospects of this company.

The company should also be seeing a little more street recognition as it made the number 1 spot in the IBD this weekend. CRNT just reported another great quarter at the end of July, and the stock price passed the $15 threshold. That should help to support the stock in this tough market and Telecom Wireless Equipment Sector is also a strong one.


Some numbers:

Market Cap - $410 M
Shares Out ~ 32 M as of next qtr
Margins - 35-36%
2nd Half Revenue Estimate - $80 M
Q3 - $38 to 40 M
EPS estimates - .45 2007 and .62 2008
Estimated 38% EPS growth - 40% Revenue Growth
Asia Pacific - 44% of revenues and faster growing area
EPS on this years numbers - 34
PEG this year - .76
Last qtr:
Rev - $37.337 M
Op Income - $2.812
N/I - 2.861

This stock has come a long way this year - up some 247% already - and the company is not forecasting to continue trouncing their EPS year over year by 100 plus percent. They did, however, raise their revenue estimates for this year from plus 30% to plus 40%. There is also the possible deal with Sprint (NYSE:S) now that they are working with ClearWire (CLWR) on some major WiMax projects. Ceragon Networks and ClearWire have worked together before, so Ceragon may be able to benefit from this and if so could have a significant impact on their numbers.

The company should also benefit from not having to pay taxes throughout the year and next year or up to 70 M.

Another note that I particularly liked coming from the management of Ceragon Networks when asked about the growth rates in the U.S. increasing as a percentage of business:

We plan that the U.S. market will continue to grow - percentage wise it's tough when Asia is growing so fast, it's taking the pie from the others.

That's the kind of tough percentage growth that I love to hear about.

Disclosure: Author is long CRNT