Given the pace at which digital transformation is taking place across various industries, the demand for connectivity and networking solutions will likely remain strong in the foreseeable future. Moreover, with the rollout of 5G, the application of advanced communication and networking solutions is expected to expand.
Therefore, novice investors could consider buying fundamentally strong stocks Boxlight Corporation (BOXL), AudioCodes Ltd. (AUDC), and Ceragon Networks Ltd. (CRNT), given their promising growth prospects.
Before diving deeper into the fundamentals of these stocks, let’s take a closer look at why the communication and networking industry is expected to perform well.
The proliferation of Internet users and the government’s push to expand broadband Internet access drive the demand for connectivity and networking infrastructure. Given the rapid adoption of cloud and edge computing solutions, the need for connectivity and networking equipment is expected to rise.
New technologies like 5G and the Internet of Things (IoT) also necessitate advanced networking architecture. Moreover, the industry benefits from the growing challenges of cybersecurity threats as it pushes enterprises to invest in boosting their network security solutions.
The 5G connections market size is expected to grow at a CAGR of 56.2% to reach $990.33 billion by 2028. The global enterprise networking market is expected to grow at a CAGR of more than 6% from 2022 to 2027.
In light of these favorable trends, let’s look at the fundamentals of the three best Technology – Communication/Networking stocks, beginning with number 3.
Stock #3: Boxlight Corporation (BOXL)
BOXL develops, sells, and services interactive classroom technology products and solutions for the K-12 education market worldwide. The company provides interactive and non-interactive projectors, flat panel displays, touch projectors, touchboards, and MimioTeach that could turn any interactive whiteboard, accessory document cameras, teacher pads for remote control, and assessment systems.
On June 22, 2023, BOXL announced the launch of its two new products for FrontRow ezRoom: Power Line for ezRoom AV and ezRoom Voice & Alert systems, and the MyFrontRow app for Boxlight interactive display.
FrontRow Product Manager Rakhi Sharma said, “With PowerLine and the MyFrontRow app, we are redefining the classroom audio experience, making it more accessible, cost-effective, and user-friendly. We believe these new offerings will empower teachers to create optimal learning environments and enhance student engagement.”
In terms of forward Price/Sales, BOXL’s 0.09x is 96.6% lower than the 2.54x industry average. Its 3.26x forward EV/EBITDA is 75.9% lower than the 13.51x industry average. Likewise, its 9.37x forward EV/EBIT is 46.3% lower than the 17.45x industry average.
BOXL’s revenues for the second quarter ended June 30, 2023, came in at $47.05 million. Its gross profit increased 5.9% year-over-year to $17.83 million. The company’s adjusted EBITDA rose 4.1% over the prior year quarter to $5.41 million. Its total comprehensive income came in at $911 thousand, compared to a total comprehensive loss of $4.61 million in the prior year quarter.
Analysts expect BOXL’s EPS for the quarter ended September 30, 2023, to increase 41.7% year-over-year to $0.34. Its revenue for the quarter ending December 31, 2023, is expected to increase 23.3% year-over-year to $52.77 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 7.1% to close the last trading session at $1.83.
BOXL’s POWR Ratings reflect solid prospects. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Technology – Communication/Networking industry, it is ranked #11 out of 52 stocks. It has a B grade for Value and Sentiment. Click here to see the additional ratings of BOXL for Growth, Momentum, Stability, and Quality.
Stock #2: AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. It offers solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
In terms of forward EV/Sales, AUDC’s 0.82x is 68.2% lower than the 2.58x industry average. Its 7.31x forward EV/EBITDA is 45.9% lower than the 13.51x industry average. Likewise, its 1.24x forward Price/Sales is 51.1% lower than the 2.54x industry average.
For the fiscal second quarter that ended June 30, 2023, AUDC’s total revenues came in at $60.02 million. Its non-GAAP net income came in at $5.13 million. Also, its non-GAAP came in at $0.16. Also, its cash, cash equivalents, and restricted cash at the end of the period increased 2.8% year-over-year to $36.23 million.
Street expects AUDC’s EPS for the quarter ended March 31, 2024, to increase 186.3% year-over-year to $0.23. Its revenue for the same quarter is expected to increase 6.7% year-over-year to $63.20 million. Over the past three months, the stock has declined 2.4% to close the last trading session at $9.35.
AUDC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value and Sentiment. It is ranked #8 in the same industry. To see the other ratings of AUDC for Growth, Momentum, and Stability, click here.
Stock #1: Ceragon Networks Ltd. (CRNT)
Headquartered in Rosh HaAyin, Israel, CRNT provides wireless transport solutions for cellular operators and other wireless service providers. Its solutions use microwave and millimeter wave radio technology to transfer telecommunication traffic between base stations, small/distributed cells, and service provider networks.
On May 16, 2023, CRNT announced a multi-year contract with the City of Cincinnati to upgrade its public safety network for up to $4.2 million. CRNT’s future-proof plan includes a multi-technology, multi-service solution that provides a robust, modernized backhaul and routing solution, as well as a long-term maintenance and support plan.
In terms of forward non-GAAP P/E, CRNT’s 9.75x is 54.5% lower than the 21.43x industry average. Its 6.04x forward EV/EBITDA is 55.3% lower than the 13.51x industry average. Likewise, its 7.81x forward EV/EBIT is 55.2% lower than the 17.45x industry average.
CRNT’s revenues for the second quarter ended June 30, 2023, increased 21.9% year-over-year to $86.15 million. Its non-GAAP gross profit increased 41.2% year-over-year to $30.40 million. The company’s non-GAAP operating income rose significantly year-over-year to $7.36 million.
In addition, its non-GAAP net income came in at $4.40 million, compared to a non-GAAP net loss of $2.47 million in the year-ago quarter. Also, its non-GAAP net income per share came in at $0.05, compared to a non-GAAP net loss per share of $0.03 in the prior-year quarter.
For the quarter ended September 30, 2023, CRNT’s revenue is expected to increase 7.5% year-over-year to $84.55 million. Its EPS for the quarter ending March 31, 2024, is expected to increase 25% year-over-year to $0.05. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 12.1% to close the last trading session at $1.86.
CRNT’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Sentiment. It is ranked #3 in the Technology - Communication/Networking industry. Click here to see CRNT’s Momentum, Stability, and Quality ratings, click here.
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AUDC shares rose $0.18 (+1.93%) in premarket trading Tuesday. Year-to-date, AUDC has declined -45.25%, versus a 14.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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