NEW YORK (TheStreet) -- Network access solutions specialist Aruba Networks (ARUN) will be one of the companies benefiting when telecom spending picks up this year. The company reports fiscal second-quarter earnings results Thursday after the close.
Aruba, like its competitors, was hit hard when AT&T(T) - Get Report and other carriers cut spending on infrastructure upgrades. This year has taken a turn for the better, and Aruba is an under-appreciated growth prospect in its sector.
Cisco Systems(CSCO) - Get Report earnings may serve as indication that Aruba's full-year estimates are too conservative. Aruba has already established a track record of solid performance in revenue and profit
In the most recent quarter, the Sunnyvale, Calif., company reported earnings of 26 cents per share, beating analysts' estimates by 1 cent. Revenue surged almost 30% year over year to $207.8 million, above analysts' estimates of $204.3 million.
The market has not rewarded the company for its efforts. Take a look at the chart.
Aruba stock closed Tuesday at $18.38, up 0.49%. The shares have climbed just 1.10% on the year to date, trailing the broader averages. In the last six months and 12 months, the stock is down 7% and 11%, respectively.
Still, the stock has a consensus buy rating and an average analyst 12-month price target of $22, suggesting 20% gains from Tuesday's close. The shares are trading at a cheap forward earnings multiple of 14, based on fiscal 2016 estimates of $1.29 per share. At a forward P/E of 14, Aruba is discounted three points lower than the average S&P 500 stock.
For the quarter that ended in January, analysts will be looking for 27 cents in earnings per share on revenue of $219 million, representing year-over-year increases of 50% and 19%, respectively. For the full year, ending in July, earnings are projected to grow 43% to $1.10, while revenue is projected to be $860 million, up 18% year over year.
TheStreet Ratings team rates ARUBA NETWORKS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ARUBA NETWORKS INC (ARUN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."
You can view the full analysis from the report here: ARUN Ratings Report
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.