OPNET (OPNT) posted results in-line with guidance for the third quarter of fiscal 2008. Although slightly below our expectations, we are encouraged that new license revenue has grown sequentially for the second consecutive quarter and revenue from the enterprise market is growing, offsetting weaker government business.
We reiterate our Buy rating on OPNT with a and reduced price target of $14.00 to reflect a subdued market for tech stocks. If we exclude amortization of acquired technology, a non-cash charge, the company should generate approximately EPS of $0.45 in fiscal 2009. On this basis, the stock is currently trading at 19.3x our EPS estimate. We maintain a six month price target of $14. Also, its P/S [price-to-sales] multiple roughly in line with its peer group.
Although we believe investors will likely be somewhat restrained until the company demonstrates some operating leverage in the business model by growing new license revenue and working through dilution from Network Physics, we do believe that the stock should approach the mean of its peer group. Further, the company is protected on the downside with $4.03 in cash and investments per share.
Read the full analyst report on OPNT.
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