| Business Description Westell Technologies, Inc., through its subsidiaries, designs, distributes, markets, and services a range of broadband, digital transmission, remote monitoring, power distribution, and demarcation products used by telephone companies and other telecommunications service providers. It operates in three segments: Customer Networking Systems (CNS) equipment, Outside Plant Systems (OSPlant Systems) equipment, and ConferencePlus services. The CNS equipment segment provides networking and high-speed transmissions products, such as modems, routers, versatile gateway devices, and wireless broadband home routers that allow service providers to deliver broadband services over existing copper, fiber, coax, or wireless infrastructures.... More... |
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| PSD Comments Buy: $2.05 Sell: $3.95 Stop Loss: $1.69 Time Horizon: 2-6 Months Over the past year and a half, technology stocks, and more specifically, multimedia networking stocks have performed quite well, but have yet to return to levels seen in 2006 and 2007. In fact, the Ishares S&P North American Technology – Multimedia Networking ETF (IGN) has doubled from lows found in late 2008 and early 2009. Westell Technologies stock (WSTL) has seen similar action, but remains undervalued relative to it's peers. The average P/E for Communication Equipment stocks is 27.9, while Westell's is just a little over 11. In the company's last fiscal year ending in late March 2009, they operated with a net income for the first time in the past three years. This came on slightly less revenues and cost's, but with a significant decrease in operating expenses. In the first quarter of 2011 ending on June 30, the company earned almost twice as much as it had during the previous quarter, and 133% more than it had during the comparable quarter in 2010. Earnings per share jumped from 3 cents to 7 cents, so if and when future earnings estimates are revised higher, the stocks forward P/E could stand as low as 5-7 given the stocks current price. The current price also already reflects some of this, given it's recent pop on the earnings release in Mid to late July. The stock went from $1.60 to $2.20, and we feel the more recent pullback to $2.00 may represent a good starting point to get involved. With only around 60 million shares outstanding, and around half a million of them changing hands daily, this issue is very liquid, but still has plenty of room to move. The stock has had a very tiny percentage being shorted even with the low price, meaning that shorts have waited to get involved, possibly for good reason. Our time horizon for this trade is fairly long, as the current market environment may stall it's short term performance. We feel getting started slowly would be wise, and more opportunities to add to the position may come in the next few weeks. Our profit target is at around 100%, but we would likely adjust it higher should the stock see a slow and steady climb from here. |
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