This tech security firm hammered estimates, posting EPS (non-GAAP) of $0.12, and beating analysts’ forecasts by five cents last quarter. The company’s revenues also beat estimates, soaring 28%, to $78.1 million.
Infoblox (BLOX)
from Capitalist Times
We’ve added Infoblox (BLOX) to the Wealth Builders Portfolio’s information technology sleeve as a buy up to $27.50.
Infoblox has created a wide array of advanced security solutions with easy-to-use interfaces that have unseated incumbent products that do the basics well but haven’t evolved to meet customer needs. The company controls about half of this very sticky market and doesn’t look likely to relinquish its grip any time soon.
At the most basic level, the company makes it easier for large organizations to properly configure and maintain networks and connected devices. Remember, network and configuration errors create opportunities for hackers to exploit. Additional security features in Infoblox’s products allow for the identification of devices on the network and blocking of DNS and DHCP requests to or from bad-guy servers.
The company hasn’t generated an annual profit yet, but continues to deliver impressive revenue growth—28% year over year in its fiscal third quarter ended April 30, 2015.
This lack of profitability reflects the expensive process of expanding its sales team, an investment that should start to pay off later this year and in early 2016, when all the new hires have completed training and are pursuing leads. Much of this effort will focus on the Asia-Pacific region, a huge market that accounts for a relatively small portion of the company’s revenue.
Unlike many tech companies, Infoblox has matured and scaled itself and its customer base without hitting a growth wall.
All too often in the tech sector, an initial product catches fire but fizzles out after failing to evolve beyond the initial design. Or a company becomes a one-hit wonder, unable to expand its product lineup.
Infoblox has dodged these pitfalls. As the company expands its customer base to include larger organizations and a wider range of industries, year-over-year revenue growth from service and support has remained steady at about 25%. Product revenue also continues to grow at a rapid clip, increasing by more than 30% in the firm’s most recent fiscal quarter.
But the stock has run up almost 30% this year and almost 100% over the past 12 months. And the last time investors became too enthusiastic—mid-2013—disappointing revenue growth led to a sharp pullback.
These concerns don’t change the fact that Infoblox has established itself as a market leader that’s demonstrated its ability to evolve and grow while meeting the market’s evolving needs and serving an expanding customer base.
Infoblox rates a buy up to $27.50 per share for aggressive investors, though you should keep your position relatively small to account for the stock’s volatility.
Roger Conrad, Capitalist Times, www.capitalisttimes.com, 888-960-2759, July 21, 2015