AsiaInfo Rides Telecom Boom: Under the Radar

BEIJING (TheStreet) -- Telecom companies focused on the U.S. are hitting a ceiling as cell phone and Internet penetration passes 90%. AsiaInfo Holdings(ASIA Quote), on the other hand, is benefitting from the explosion of communication technology in China.

Beijing-based AsiaInfo sells software that controls spam, manages networks and helps users keep track of their clients. The company's revenue has grown 33% and earnings per share have climbed 44% annually, on average, during the past three years. Its customers include some of the biggest names in Chinese technology, including China Mobile(CHL Quote) and China Telecom(CHA Quote).

AsiaInfo's third-quarter net income surged 49% to $9.1 million and earnings per share advanced 36% to 19 cents. Revenue grew 42% to $64 million. AsiaInfo's gross margin rose from 53% to 55%, and its operating margin increased from 12% to 16%.

AsiaInfo has an ideal financial position, with $236 million of cash, translating to a quick ratio of 2.5, and no debt. We give the company a financial strength score of 7.9 out of 10, beating the "buy"-list average of 7.1. AsiaInfo garners a superlative growth score of 9.2.

The shares have a trailing price-to-earnings ratio of 42, a lofty premium to the market and software rivals. But if you consider AsiaInfo's projected earnings and sales, the company is fairly valued compared to its peers. And its shares are cheap based on the company's book value.

AsiaInfo shares have surged 98% this year, more than doubling the 47% gain of the Russell 2000 Technology Index. They've risen 37% annually, on average, for the past five years.