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Don't Give Up on Symantec

Stocks in this article: SYMC IGV ORCL IBM PANW FEYE INTC

NEW YORK (TheStreet) -- Analysts hate Symantec (SYMC) -- at least seven of them have downgraded the Internet security company. But I don't think it's as bad as you may think.

On March 20 Symantec fired CEO Steve Bennett, who has been running the struggling company for less than 20 months. Although Symantec has shied from giving specific reasons for the CEO's exit, rumors abound that Symantec was not satisfied with the pace of the turnaround. In 2012, the company fired Bennett's predecessor, Enrique Salem, in a similar fashion.

Since April 2009, a period covering both Salem and Bennett's tenure, Symantec's shares have risen by 34.3% and are currently hovering at $20. In the same period, the North American technology sector, as represented by iShares North American Tech-Software ETF (IGV), has climbed 133.9%.

The company has struggled with growth. It had declining revenue for two consecutive quarters and less than 3% overall growth in the last five years. But it has improved its margins by 680 basis points. With just a 7% cut in its operating expenses in the next results, Symantec could achieve its annual target.

Moreover, the company, which is the biggest player in its industry, could also be on the takeover radar. Symantec is currently trading at just 16.3 times its trailing earnings. That's cheap when compared with the industry's average of nearly 30 times.

The company's low valuation, coupled with the the CEO departures, could once again fuel takeover speculation, as in in 2012 following Salem's departure. Back then, Oracle (ORCL) and IBM (IBM) were discussed as potential buyers.

Under Salem and Bennett, Symantec's top line growth has been modest at best. Symantec's net revenues have reported an overall compounded annual growth rate of just 2.35%. Similarly, during this period, Symantec's earnings per share have grown by 3% on a compounded annual basis.

In the previous quarter, Symantec's revenue dropped 5% from last year to $1.71 billion. This was due to the weakness in the PC market, a 12% drop in sales in Asia-Pacific and ongoing restructuring efforts. This translated into adjusted earnings of 51 cents per share, which were up 13% from last year. That was better than analysts' expectations of a profit of 43 cents per share on revenue of $1.65 billion.

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