F5 Networks, Inc. (FFIV) has been reaping the benefits of its ongoing growth initiatives, product innovation, strong balance sheet, shareholder-friendly moves and impressive quarterly results. Notably, the company has amassed a year-to-date return of 49.3%.
The price appreciation can be attributed to F5 Networks’ continuous product launch and growing demand for its security solutions. The company’s product refreshes are expected to boost revenues, going forward. Moreover, these initiatives are expected to expand its total addressable market (TAM) and result in client wins.
Further, a few months back the company unveiled the latest Synthesis of Software Defined Application Services (SDAS) for its flagship Big-IP solutions. SDAS is a networking approach, which enables real-time, event-driven changes that meet the growing demand for data center solutions across the enterprise sector. Another important reason for choosing SDAS technology is that it is applicable for both private and public cloud infrastructures.
Moreover, F5 Networks partnered with VMware Inc. (VMW) to provide cloud-based security services. The company will combine its BIG-IP application services with VMware vCloud Hybrid Service, which provides private cloud-based services to make the cloud-computing environment more secure, simple, flexible and efficient.
In addition, F5 Networks’ “Good, Better, Best” pricing strategy and enhanced capabilities of BIG-IQ platform have helped to streamline the product portfolio and drive year-over-year revenue growth. Launched in 2013, BIG-IQ is a software-based management solution facilitating the management of BIG-IP devices and application services.
Coming to quarterly performances, F5 Networks posted better-than-expected results in the last quarter (fourth-quarter fiscal 2014). The company’s adjusted earnings came in at $1.29 per share, beating the Zacks Consensus Estimate of $1.22 and surging 31.6% year over year.
Further, the company’s revenues of $465.3 million not only increased 17.8% from the year-ago quarter but also beat the Zacks Consensus Estimate of $460 million. Improvement in the top line was primarily due to double-digit revenue growth across all its business segments backed by higher customer wins and product rollouts.
F5 Networks’ balance sheet does not have any long-term debt. The company reported cash flow from operations of $548.9 million for the 12 months ended Sep 30, 2014. F5 Networks repurchased approximately 1.32 million shares for $150 million during the quarter.
As things stand now, we believe that better execution and focus on enterprise and service providers will place F5 Networks well in the application delivery controller market. Nevertheless, a volatile spending atmosphere and competition from Juniper Networks Inc. (JNPR) and Cisco Systems Inc. remain the concerns.
Currently, F5 Networks carries a Zacks Rank #2 (Buy). A better-ranked stock worth considering in the Internet software industry is Rally Software Development Corp. (RALY) sporting a Zacks Rank #1 (Strong Buy).
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