Just two days before releasing its fourth quarter results, network monitoring company ECtel has announced a $40 million agreement with a leading global telecom and data service provider, which has declined to be identified.
(Nasdaq:ECIL) owns 75% of ECtel, which develops applications for communications firms to monitor and ensure high quality on IP and telephony networks, and to discover and prevent wireline and wireless network fraud. In addition, the company's solutions let communication providers charge a fee for traffic and services offered to other providers.
ECtel has announced several agreements in recent weeks, including a contract with Israeli wireless provider
. ECtel VP and CFO Avi Goldshtein says that the company has several other large agreements in the pipeline. Goldshtein insists that he is very pleased with ECtel's growing market share and with the firm's potential. Research shows that incidents of wireline and wireless fraud account for $10 billion in losses each year for telecom providers and ECtel execs believe there is still a huge untapped market for their products, a market which is growing at 30% per year.
Wall Street analysts forecast that the company will post an EPS of 18 cents for the fourth quarter of 2000, and 64 cents for the year 2000. Revenues are expected to total $16.56 million in the fourth quarter of 2000.
Goldshtein has noted an ongoing rise in sales to cellular companies, which he says is directly related to ECtel's ability to help service providers boost their net profits. But he points out that only a fraction of the new telecom agreement will be reflected in the company's fourth quarter revenues.
J.P. Morgan expects company to beat forecasts in Q4
has recently rated ECtel as an attractive Buy opportunity, as it is trading at a multiple of 17 based on predicted earnings for 2000. This represents a discount of 71% against ECtel's rivals. Analysts Victor Halpert and Robin Nazarzadeh believe the ECtel stock is undervalued. Investment bank J.P. Morgan H&Q today published a report on the company. Analysts Reg King and Kerry Rice agree with Goldshtein and say that ECtel's sales to telecom firms will help the company post good revenues and profit results in the fourth quarter of 2000. The analysts have even gone so far as to predict that ECtel will surpass analyst forecasts. They've set a target price of $30, which is double the company's current stock price.