Skip to main content

Netscout - mystery breakout

Many stocks just peek above their upper Bollinger Band. Then there are other stocks that explode above their upper Bollinger Band. We've got one the latter kind for you today.

Netscout Systems (NTCT) exhibited a powerful move on Friday and showed up this weekend on our list of Bollinger Band Breakouts. You can see that breakout clearly on the chart below:

A month ago the company announced Q1-2010 earnings and missed analyst expectations by a penny. The company retained some investor goodwill, however, by reaffirming forward guidance and reinstating plans for a stock buyback.

Background --

NetScout Systems, Inc. designs, develops, manufactures, markets, sells, and supports application and network performance management solutions worldwide. The company's primary product suite monitors, collects, and publishes information on the behavior of individual applications and services, such as voice over Internet protocol, streaming media, electronic trading, supply chain management, interactive smart phone applications, and customer relationship management; and the performance of the underlying network, such as routers, switches, and communication links, as well as the level of activity by end-users or subscribers.

The company recently acquired Network General and the integration seems to moving along well. The company has partnered with Cisco and HP.

The company is in a field that is attracting more attention: monitoring quality of service (QoS) for networks. It is also in the growing niche of monitoring application performance. An added benefit is that the level of detail provided by Netscout products enables customers to dig into problem areas and devise solutions.

Financially speaking, looking at the numbers on an annual basis there a pronounced growth trend in place. Looking at things on a quarterly basis, the company has experienced some weakness over the last two quarters (who hasn't during this downturn) but has managed to remain profitable. The chart below shows a snapshot of the income statement:

Explore more NTCT Data on Wikinvest

Unfortunately it doesn't have data for the most recent quarter. but the quarter-over-quarter decline was very modest so you can get the idea of the company's performance. Click on the "5Y" button to see the strong growth over the last two years.

Bottom line, we have here a company in a growing niche that has remained profitable during a time when many companies have seen negative results. The company is certainly doing better than one of its main competitors, Opnet.

After a 7% move on Friday, it is easy to assume the company is overbought. On a short term basis, there is probably room for a pullback but with a PEG of 0.88, a trailing PE of 19 and forward PE of 12, the company doesn't actually look especially overvalued.

So what drove Netscout's big move on Friday? I wish I knew. Was it an analyst upgrade? A new contract announcement? I couldn't find a thing searching the web this weekend. I wonder if we'll hear news of a buyout offer this week? IDC has written that further consolidation in the network performance management market can be expected. Indeed, the Network General acquisition was used as an example. So we'll just have to watch the news and see if Netscout shows up as the next Cisco acquistion.

Disclosure: no positions


Master Howto said…
Thanks for sharing this insight. I like to read your article along with its sharp analysis.

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here: Contact us if you have questions or identify any new issues.