Netgear Inc. (NASDAQ: NTGR) designs networking products that address the specific needs of small business and home users. The company's hubs, routers, switches, servers and interfaces enable customers to share internet access, peripherals, files, digital multimedia content and applications among multiple personal computers and other internet-enabled devices. The firm sells through distributors to such retailers as Best Buy (NYSE: BBY) and Circuit City (NYSE: CC). It also runs an online store. Netgear uses third-party manufacturing contractors in China and Taiwan to produce its equipment.

The company surprised the Street last week, when it reported Q3 EPS of 40 cents and revenues of $191.7 million. Analysts had been expecting 38 cents and $181 million. The CEO attributed success to the fast ramp of the firm's new ReadyNAS product line. Management also guided Q4 revenues to $195-$200, versus consensus of $190.41 million. The share price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the shares with two "strong buys," five "buys" and six "holds." Analysts see a 16% average annual growth rate, through the next five years. The NTGR Price to Sales ratio (1.77), Price to Book ratio (3.46), Sales Growth rate (26.46%), EPS Growth rate (21.21%) and Revenue per Employee ($1.78 million) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $24.85 and $41.33. A stop-loss of $30.25 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.