Could Radware Get Bought Out?

Radware Ltd RDWR is breaking to fresh highs today on over 2x the average daily stock volume, currently trading at $24.23. The stock appears ready to make a major break to the upside given the strong fundamentals, solid technicals, and the recent M&A boom in the Tech sector. This begs the question, “Could “smart” networking plays (like RDWR), which increase company efficiency and productivity, be the next stocks to receive bids?” It is certainly a possibility. Lets take a closer look at Radware; this company’s technology essentially makes networks work smarter. This is done by searching for the best path for data to take, thus optimizing traffic and bandwidth. This allows companies to run their IT systems more efficiently, which cuts down on new hardware costs. Think of it as “cloud” networking and optimization. The company’s recent earnings showed an increase in revenues of 30% year over year. Note that the company has been delivering sequential gains for the past five years, increasing market share along the way, which clearly shows that RDWR is seeing sustained business strength. As for valuation, the stock is quite cheap relative to its growth. They are expected to earn $1.16 in 2011, which equates to a forward P/E of 21x earnings. Factor in the company’s 5-year growth rate of 30.30% and that’s a PEG ration of 0.69. That is super, super cheap; cheap enough that hedge funds are going to continue to pile into the name even if it remains independent. Long story short, given the company’s market cap of $503.7 million, this company could be snatched up by several large Tech players with just the cash on their balance sheets. Cisco Systems CSCO, for instance, has $39 billion in cash and short-term equivalents. Juniper Networks JNPR has over $2.1 billion in cash and short-term equivalents on the balance sheet; IBM IBM has $18 billion in cash and short-term equivalents. Whether buying it for its fundamental growth, technical breakout, or the strong possibility of a buyout; this looks like a solid long. For more great research like this, as well as how to play it through options…please visit Benzinga’s Options & Volatility Edge and Benzinga’s Cash Generator.