Validea’s pick of the week provides a detailed report on a company that scores well in the stock-screening service’s model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor provides marketing and data services to Validea.ca and receives compensation. Try it.
Brocade Communications Systems Inc. is a supplier of networking equipment, including end-to-end IP-based Ethernet and storage area networking solutions for businesses and organizations of all types and sizes, including global enterprises, telecommunication firms, cable operators, and mobile carriers. Its products and services are sold globally, both directly to end-user customers and through distribution partners. It has a market cap of $3-billion (U.S.).
Brocade has grown earnings per share at a 39.6-per-cent pace over long term (using an avg of the 3, 4, and 5 yr EPS growth rates). It trades for just 10 times trailing 12-month EPS. That and its growth rate make for a strong 0.25 PE-to-growth ratio, part of why the Peter Lynch-based model has strong interest.
The company gets some interest from the Kenneth Fisher-based model, thanks to its 1.4 price/sales ratio, 31.4-per-cent total debt/equity ratio, and 11.7-per-cent three year average net profit margins.
Brocade has $1.3-billion in net current assets vs. $800-million in long-term debt, which the Benjamin Graham-based model likes. It has a 3.29 current ratio, which the Graham model also likes.
The company has a solid 14-per-cent return on equity, a 2.3-per-cent dividend yield and a reasonable 1.3 price/book ratio.
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