Juniper Who? F5 Out Ahead: Under the Radar

"Under the Radar" uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

BOSTON (TheStreet) -- F5 Networks(FFIV Quote) of Seattle is a leader in application-delivery networking. In other words, it sells products that streamline companies' technology infrastructure while reducing costs. With a market value of $4 billion, F5 isn't a household tech name, but it increased revenue during the recession and is seeing demand rebound faster than consumer-dependent peers like Dell(DEL Quote).

Third-quarter net income rose 44% to $28 million and earnings per share climbed 50% to 36 cents. Revenue inched up 2% to $175 million. F5's operating margin jumped from 18% to 23%. The company has an ideal financial position, with $317 million of cash and no debt. We give F5 Networks a financial-strength score of 7.9 out of 10, higher than the "buy"-list average.

During the latest quarter, product revenue dropped 6% to $109 million as service revenue advanced 19% to $66 million. The cost of sales declined in both categories, increasing gross profit 5% to $139 million. Earnings benefitted from an 8% drop in operating expenses. F5's net profit margin ascended from 12% to 16%, higher than peers Juniper Networks(JNPR Quote) and Harris Corp.(HRS Quote).

F5 trades at a discount to peers on trailing earnings, projected earnings and cash flow. But its stock is expensive when considering book value and sales. Over the past three years, F5 has increased revenue 18% annually, on average, and boosted profit 12%. Its stock surged 124% over the past year, easily beating Juniper Networks and Harris.

We rate F5 Networks "buy."

-- Reported by Jake Lynch in Boston.