Whether it's in the carrier-class router business, or their upcoming network software specialty, there is a North Billerica, Massachusetts outfit that is in there pitching. The company provides IP solutions to some of the world's leading service providers.
Avici Systems (NASDAQ: AVCI) provides high-speed data networking equipment that enables service providers to transmit data, voice, and video. The firm's Terabit router transmits large volumes over core fiber-optic communications networks. Other models are used by service providers with smaller core networks. The company is in the process of phasing into the network management software business. Avici has a technology partnership with Intel (Nasdaq: INTC) and is a preferred supplier of IP core routers for Nortel Networks (NYSE: NT). Alcatel-Lucent (NYSE: ALU), Cisco Systems (NASDAQ: CSCO) and Juniper Networks (NASDAQ: JNPR) are competitors.
The company pleased investors last week, when it reported Q2 EPS of 81 cents and revenues of $29.6 million. Analysts had been expecting 21 cents and $15.8 million. Management also guided FY07 revenues to $110-125 million ($60.16 million consensus).
The stock popped on the news and is now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Analysts see a 20% average annual growth rate, through the next five years. The AVCI P/E ratio (7.55), Price to Sales ratio (1.83), Price to Book ratio (2.03), Price to Cash Flow ratio (5.87), Price to Free Cash Flow ratio (8.58%), EPS Growth rate (202.18%), Operating Margin (20.60%), Net Profit Margin (23.95%), Return on Assets (24.70%), Return on Investment (32.48%), Return on Equity (32.48%) and Net Income per Employee ($196k) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 71% of the outstanding shares. Over the past 52 weeks, AVCI has traded between $6.47 and $13.96. A stop-loss of $9.10 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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