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F5 Networks (FFIV) Present Rapid Growth

Dec 05 2010

F5 Networks (FFIV) Present Rapid Growth

F5 Networks (FFIV) is a Seattle based provider of technology that optimizes the delivery of Internet sites and applications including cloud computing. With a recent market cap of $11.19 billion, the company has had a very good year of growth with its stock price nearly tripling. Like many tech companies that are growing, the stock does not offer a dividend but earnings are reinvested in the business.

The company is set to release their most recent quarter on January 19th and the stock price continues to reach new 52 week highs as the date approaches. The most recent new high, $136 a share, was reached on  November 29th. Analysts have steadily improved their expectation for this earnings release from 72 cents a share to 83 cents a share over the 90 days. While the company has surprised the market with its last four quarterly releases. The current expectations present almost a 60% improvement from the same quarter a year ago.

Revenue is also rapidly increasing with the most recent estimates predicting 42% sales growth.The current price to earnings ratio (P/E) is 38.96 which presents a 1.65 PEG ratio. Fairly high for someone looking for value but the company is rapidly growing which makes the expensive stock price more tolerable.

The stock was recently presented on Seeking Alpha as one of the top 25 high growth, profitable stocks. The article discusses many of the ideals that I have written about here, its rapid revenue and sales growth in addition to its stock price appreciation. The short float is also mentioned which presents the amount of short sellers for the stock. As you can image, there aren’t many short sellers of the stock.

Options for the stock are pretty active near the money. Call Strike Prices from $140 to $155 show a lot of interest for December. Purchasing near the money or a later expiration than December makes sense going into the earnings announcement next month. The chart trend is higher and currently giving a buy signal. I think you can hold the stock itself in addition to the options going into the earnings but I am always wary of holding a position when the actual announcement is made.

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