Riverbed Technology (RVBD) has had a good week so far after a pretty dismal year. This beaten down stock is finally picking up some positive catalysts and analyst upgrades. It might be worth averaging into given its valuation and a selloff that has brought down the stock by 60% over the last year.
Recent positive catalysts for Riverbed:
- Needham initiated Riverbed as a "Strong Buy" today.
- This comes a day after Jefferies upped its rating to a "Hold" from "Underperform."
- Gabelli & Company also initiated the shares as a "Buy" in late May.
- The stock has long term technical support at these levels (See Chart)
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"Riverbed Technology provides solutions to the fundamental problems associated with information technology performance across wide area networks in the United States and internationally." (Business description from Yahoo Finance)
4 reasons RVBD is has good value at $16 a share:
- The company has a fortress balance sheet with almost $500mm in net cash (more than $3 a share) which represents more than 20% of the stock's current market capitalization.
- RVBD has a projected five year PEG of under 1 (.73) and is selling at the bottom of its five year valuation range based on P/S and P/CF.
- Although growth has slowed, analysts still expect robust revenue growth in the teens for both FY2012 and FY2013. It also is priced at just over 13 times forward earnings, a steep discount to its five year average (32.7).
- The 32 analysts that cover the stock have a median price target of $23.50 a share, approximately 50% above the current price level of the stock.
