In my last post I talked about I was able to find a couple of stocks on Finviz that may have durable competitive advantage.
Ceragon Network Limited was one of them.
Founded in 1996 and headquarters in Tel Aviv, Israel, Ceragon Network Limited offers wireless backhaul solutions to wireless service providers, public safety organizations, government agencies, utility companies and oil and gas companies all around the world. The company’s technologies provide highly reliable, high-capacity wireless backhaul with minimal use of spectrum, power and other resources. As a result, the company’s technologies allow simple and quick network modernization as well as increase productivity of processes. On 2016, the Ceragon generated over $293 million USD of revenue.
Ceragon Network was listed on the NASDAQ on September 6, 2000 and its current price is $2.08.
Here is the company’s financial statement analysis from 2013 to 2016 (click here if you forget what we are talking about):
After looking at the company’s financial statements, I know I am not going to invest in Ceragon at the present moment. First of all, the company has negative retained earnings. Second of all, the company’s return on capital expenditure is very high. Lastly, the company’s debt to shareholders’ equity ratio is high.
I could tell management has been improving Ceragon’s financial situation because the money spend of selling, general and administrative expenses and research and development are decreasing on a yearly basis. Furthermore, the company has started to generate positive net income since 2015. However, it is still not a good time to invest in Ceragon now because of the negative retained earnings.
Ultimately, I would keep Ceragon in my watchlist just because the company has businesses all over the world and has a management team that actually trying to turn the company around. I may consider invest in Ceragon when retained earnings become positive and P/E ratio is less than 20.
In the next post, we will evaluate Fabrinet and see whether Fabrinet has a durable competitive advantage. Please feel free to leave any comments below! Catch you on the flip side!