Radcom's Q3 Earnings & Revenues Beat, Rise Y/Y, Stock Gains 12%

Value investors have preferred the price-to-earnings ratio or P/E since time immemorial as a means to identify value stocks. However, in the case of loss-making companies that have a negative price-to-earnings ratio, the price-to-sales or P/S ratio is considered while determining their true value.

However, the price-to-book ratio (P/B ratio), though used less often, is also an easy-to-use valuation tool for identifying low-priced stocks with great returns.

P/B is the ratio of stock price to book value.

It is calculated as below:

P/B ratio = market capitalization/book value of equity.

The P/B ratio helps to identify low-priced stocks with high growth prospects. Pfizer PFE, General Motors Company GM, The Greenbrier Companies GBX, Itron ITRI and StoneCo STNE are some such stocks.

Now, let us understand the concept of book value.

What is Book Value?

There are several ways by which book value can be defined. Book value is the total value that would be left over, according to the company’s balance sheet, if it goes bankrupt immediately. In other words, this is what shareholders would theoretically receive if a company liquidates all its assets after paying off all its liabilities.

It is calculated by subtracting total liabilities from the total assets of a company. In most cases, this equates to common stockholders’ equity on the balance sheet. However, depending on the company’s balance sheet, intangible assets should also be subtracted from the total assets to determine book value.

Understanding P/B Ratio

By comparing the book value of equity to its market price, we get an idea of whether a company is under or overpriced. However, like P/E or P/S ratio, it is always better to compare P/B ratios within industries.

A P/B ratio of less than one means that the stock is trading at less than its book value or the stock is undervalued and, therefore, a good buy. Conversely, a stock with a ratio greater than one can be interpreted as being overvalued or relatively expensive.

For example, a stock with a P/B ratio of 2 means that we pay $2 for every $1 of book value. Thus, the higher the P/B, the more expensive the stock.

But there is a warning. A P/B ratio of less than one can also mean that the company is earning weak or even negative returns on its assets or that the assets are overstated, in which case the stock should be shunned because it may be destroying shareholder value. Conversely, the stock’s price may be significantly high — thereby pushing the P/B ratio to more than one — in the likely case that it has become a takeover target, a good enough reason to own the stock.

Moreover, the P/B ratio is not without limitations. It is useful for businesses like finance, investments, insurance and banking or manufacturing companies with many liquid/tangible assets on the books. However, it can be misleading for firms with significant R&D expenditure, high debt, service companies, or those with negative earnings.

In any case, the ratio is not particularly relevant as a standalone number. One should analyze other ratios like P/E, P/S and debt to equity before arriving at a reasonable investment decision.

Screening Parameters

Price to Book (common Equity) less than X-Industry Median: A lower P/B compared with the industry average implies that there is enough room for the stock to gain.

Price to Sales less than X-Industry Median: The P/S ratio determines how much the market values every dollar of the company’s sales/revenues — a lower ratio than the industry makes the stock attractive.

Price to Earnings using F(1) estimate less than X-Industry Median: The P/E ratio (F1) values a company based on its current share price relative to its estimated earnings per share — a lower ratio than the industry is considered better.

PEG less than 1: PEG links the P/E ratio to the future growth rate of the company. The PEG ratio portrays a more complete picture than the P/E ratio. A value of less than 1 indicates that the stock is undervalued, and investors need to pay less for a stock that has bright earnings growth prospects.

Current Price greater than or equal to $5: They must all be trading at a minimum of $5 or higher.

Average 20-Day Volume greater than or equal to 100,000: A substantial trading volume ensures that the stock is easily tradable.

Zacks Rank less than or equal to #2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

Value Score equal to A or B: Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best opportunities in the value investing space.

5 Low Price-to-Book Stocks

Here are five of the 13 stocks that qualified the screening:

New York-based Pfizer is one of the largest drugmakers in the world, marketing a wide range of drugs and vaccines. Pfizer currently has a Zacks Rank #2 and a Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

PFE has a projected 3-5-year EPS growth rate of 10.7%.

Headquartered in Detroit, General Motors is one of the world’s largest automakers. General Motors, along with its strategic partners, produces, sells and services cars, trucks and parts under four core brands — Chevrolet, Buick, GMC and Cadillac. General Motors assembles passenger cars, crossover vehicles, light trucks, sport utility vehicles, vans and other vehicles. GM has a projected 3-5-year EPS growth rate of 12.8%.

General Motors currently has a Zacks Rank #2 and a Value Score of A.

Headquartered in Lake Oswego, OR, The Greenbrier Companies is a leading supplier of transportation equipment and services to the railroad and related industries. It also engages in complementary leasing and services activities.

The Greenbrier Companies has a Zacks Rank #1 and a Value Score of A at present. GBX has a projected 3-5-year EPS growth rate of 23.3%.

Liberty Lake, WA-based Itron is a technology and services company and one of the leading global suppliers of a wide range of standard, advanced, and smart meters and meter communication systems, including networks and communication modules, software, devices, sensors, data analytics and services to the utility and municipal sectors.

ITRI presently has a Zacks Rank #2 and a Value Score of B. The company has a projected 3-5-year EPS growth rate of 25.0%.

StoneCo provides financial technology solutions. The company offers an end-to-end cloud-based technology platform to conduct electronic commerce across in-store, online and mobile channels. StoneCo is based in Sao Paulo, Brazil.

STNE has a Zacks Rank #1 and a Value Score of B. STNE has a projected 3-5-year EPS growth rate of 23.5%.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance

Zacks Investment Research

EchoStar Corporation SATS reported a third-quarter 2024 non-GAAP loss of 52 cents per share compared with a loss of 51 cents in the prior-year quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 28 cents by 85.7%.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Revenues in the quarter totaled $3.9 billion, down 5% year over year. The top line missed the consensus mark by 1.5%. Net subscriber losses in Pay-TV and Broadband and satellite services led to the contraction. However, steady growth in Retail Wireless and 5G Network Deployment businesses is a tailwind.

In response to the results, SATS’ shares plummeted 12.9%, and the trading session closed at $22.76 on Nov. 12. Shares of the company have gained 133.7% compared to the sub-industry’s rise of 18.2% in the past year.

Segmental Details

In the reported quarter, revenues from the Pay-TV segment were down 6.7% year over year to $2.62 billion. In the third quarter, SATS experienced a net decline of roughly 43,000 pay-TV subscribers, a notable improvement from the loss of 64,000 subscribers in the previous year’s quarter. A key factor in this improvement was the increase in SLING TV subscribers, which grew by 145,000, surpassing the 117,000 additions in the prior year quarter.

EchoStar now has 8.03 million pay-TV subscribers, which includes 5.89 million DISH TV and 2.14 million SLING TV customers. The surge in SLING TV subscriptions and lower churn in DISH TV helped offset fewer new DISH TV activations.

Retail Wireless category ended the quarter with 6.98 million subscribers and reported $896 million in net sales, up 0.5% year over year. The segment saw a net decrease of nearly 297,000 subscribers in the third quarter compared with a decline of 225,000 in the year-ago period. The lower net subscriber losses were due to a reduction in churn rates. The segment was adversely impacted by net losses from government-subsidized subscribers, particularly due to the Affordable Connectivity Program funding closure on June 1, 2024. Excluding these losses, the company added approximately 62,000 Retail Wireless subscribers during the quarter.

EchoStar Corporation Price, Consensus and EPS Surprise

EchoStar Corporation price-consensus-eps-surprise-chart | EchoStar Corporation Quote

Revenues from Broadband and Satellite Services were $386.7 million compared with $413 million in the prior-year quarter. Subscribers declined by 43,000 in the third quarter, an improvement from the 59,000 loss reported in the prior-year period. The net loss reduction is attributed to the successful launch of the EchoStar XXIV (Jupiter 3) satellite, which enhanced service offerings and attracted new customers. However, the conclusion of the ACP program on June 1, 2024, hurt broadband satellite subscriber growth.

Net sales from 5G Network Deployment increased to $43.2 million from $29.9 million a year ago.

Other Details

Operating income before depreciation and amortization (OIBDA) was $316.7 million in the third quarter compared with $365.9 million in the year-ago quarter.

OIBDA for PayTV was $676 million compared with $675.6 million a year ago.

OIBDA for Broadband and Satellite Services was $77.5 million, down 31.4% year over year.

OIBDA loss for Retail Wireless was $90.8 million compared with a loss of $105.6 million in the prior-year period.

OIBDA loss for 5G Network Deployment was $330.7 million compared with a loss of $299.2 million a year ago.

Balance Sheet

As of Sept. 30, 2024, SATS had total cash and cash equivalents of $622.6 million compared with $419.2 million as of June 30, 2024.

For the nine months ended Sept. 2024, SATS generated $1.2 billion of cash from operating activities compared with $2.02 billion in the year-ago period.

SATS’ Zacks Rank

Currently, EchoStar carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

Iridium Communications IRDM reported an EPS of 21 cents for the third quarter of 2024, beating the Zacks Consensus Estimate by 5%. The company incurred a loss of 1 cent per share in the prior year quarter.

Shares of IRDM lost 16.1% in the past year.

Itron Inc ITRI reported non-GAAP EPS of $1.84 for third-quarter 2024, which beat the Zacks Consensus Estimate by 62.8%. The company reported earnings of 98 cents in the prior-year quarter.

Shares of ITRI surged 90.8% in the past year.

Watts Water Technologies, Inc. WTS reported third-quarter 2024 adjusted EPS of $2.03 compared with $2.04 in the prior-year quarter. The bottom line topped the Zacks Consensus Estimate by 2%.

Shares of WTS have gained 10.4% in the past year.

Zacks Investment Research

Intrusion Inc. INTZ incurred a third-quarter 2024 loss of 35 cents per share compared with a loss of $2.78 a year ago. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 42 cents. Reduced operating and interest costs due to the conversion of $9.5 million of senior debt to equity helped the company achieve a considerably narrower net loss in the third quarter.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Quarterly revenues totaled $1.5 million, up 2.5% year over year and 3% of 3% on a sequential basis. The Zacks Consensus Estimate for revenues was pegged at $2 million. The upside resulted from an increase in Intrusion Shield revenues (up 49% sequentially). This growth reflects a surge in customer demand for cybersecurity solutions and Intrusion’s expanding market reach as it inks more Intrusion Shield logos each quarter. INTZ added seven new customers to its Shield portfolio in the third quarter, bringing the total number of new logos acquired year to date to 18.

Intrusion Inc. Price, Consensus and EPS Surprise

Intrusion Inc. price-consensus-eps-surprise-chart | Intrusion Inc. Quote

In addition, INTZ was awarded a $2 million contract by the U.S. Department of Defense, supporting the government’s growing cybersecurity efforts through its Shield and consulting services. Management anticipates the continued strength of the Intrusion Shield to enhance financial outcomes in the fourth quarter of 2024 and beyond.

In response to the results, INTZ’s shares jumped 11.5%, and the trading session closed at 82 cents on Nov. 12. Shares of the company have lost 92.2% in the past year against the sub-industry's growth of 10%.

Other Details

The gross profit margin was 77%, slightly lower than 78% reported in the prior-year quarter, driven by varying product mixes across quarters.

Total operating expenses for the period were $3.2 million, down from $3.8 million in the previous year quarter.

Operating loss was $2 million, narrowing 24% year over year due to lower operating expenses.

Balance Sheet

As of Sept. 30, 2024, INTZ had total cash and cash equivalents of $1.1 million compared with $1.5 million as of June 30, 2024.

INTZ’s Zacks Rank

INTZ currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

BCE Inc. BCE reported third-quarter 2024 adjusted EPS of C$0.75 (55 cents) compared with C$0.81 in the prior-year quarter. The Zacks Consensus Estimate was pegged at 57 cents.

Shares of BCE lost 26.4% in the past year.

Itron Inc ITRI reported non-GAAP EPS of $1.84 for third-quarter 2024, which beat the Zacks Consensus Estimate by 62.8%. The company reported earnings of 98 cents in the prior-year quarter.

Shares of ITRI surged 94.8% in the past year.

Watts Water Technologies, Inc. WTS reported third-quarter 2024 adjusted EPS of $2.03 compared with $2.04 in the prior-year quarter. The bottom line topped the Zacks Consensus Estimate by 2%.

Shares of WTS have gained 10.4% in the past year.

Zacks Investment Research