Amid the COVID-19 pandemic, communication solutions were in high demand as people spent most of their time indoors and relied on smart gadgets for their work. This trend is expected to continue due to the accelerated digitization and resurgence of omicron COVID-19 cases. Moreover, communication solutions are expected to keep witnessing increasing demand as hybrid working continues even after the pandemic. According to a report by Market Research Future, the next-generation wireless communication market is expected to grow at a CAGR of 15.4% by 2027. 

With that in mind, today I’ll analyze and compare two communications stocks: CalAmp Corp. (CAMP) and Sierra Wireless, Inc. (SWIR).  CAMP provides telematics systems and software and subscription services internationally. The company offers advanced telematics products, CalAmp Telematics Cloud platform, and professional services. SWIR provides device-to-cloud IoT solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It serves enterprises, industrial companies, and OEMs through direct and indirect channels.

CAMP is down more than 24% in the past 3 months, while SWIR has gained 5.5%.  Year-to-date (YTD), CAMP is down 23.8% and SWIR is up 17%.  

Latest Developments

On December 21, 2021, shares of CAMP plunged after releasing their Q3 earnings report that showed lower revenue from the year-ago period.  Jeff Gardner, CAMP’s President, and CEO, said, “Despite this challenging situation, we are encouraged with the strong customer demand as evidenced by the consistent high level of customer backlog over the past few quarters as we continue our transformation to a SaaS enterprise.”

On October 18, 2021, SWIR announced that its AirLink XR Series cellular routers architected for 5G performance, the XR90 and the XR80, are certified to operate on T-Mobile’s 5G network. This could increase the demand for its products.

Recent Financial Results

CAMP’s total revenue decreased 12% year-over-year to $69 million for the fiscal third quarter ended November 30, 2021. The company’s adjusted EBITDA declined 66.3% year-over-year to $2.99 million, while its adjusted net loss came in at $2.67 million compared to an income of $3.33 million in the prior-year quarter. Also, its adjusted loss per share came in at $0.08 compared to an EPS of $0.10 in the year-ago period.

SWIR’s revenues decreased 27.3% year-over-year to $82.45 million for the fiscal third quarter ended September 30, 2021. The company’s adjusted EBITDA loss grew 110.9% year-over-year to $14.96 million, while its adjusted loss from continuing operations came in at $20.68 million, representing a 76.4% year-over-year increase. Also, its adjusted loss per share came in at $0.56, up 75% year-over-year.

Past and Expected Financial Performance

CAMP’s levered FCF grew at a CAGR of 1.7% over the past three years. Analysts expect CAMP’s revenue to decrease 9.9% in the current year but increase 5.6% next year. The company’s EPS is expected to grow 23.3% in the current year and 18.9% next year. Moreover, its EPS is expected to grow at a rate of 12% per annum over the next five years.

On the other hand, SWIR’s levered FCF grew at a CAGR of 19.3% over the past three years. The company’s revenue is expected to decrease 2.1% in the current year but increase 20.1% next year. Its EPS is expected to grow 15% in the current year and 105.9% next year. Also, SWIR’s EPS is expected to grow at a rate of 15% per annum over the next five years.

Profitability

SWIR’s trailing-12-month revenue is 1.43 times what CAMP generates. However, CAMP is more profitable with a gross profit margin of 42% compared to SWIR’s 34.1%.

Valuation

In terms of trailing-12-month P/S, SWIR is currently trading at 1.39x, 61.6% higher than CAMP’s 0.86x. Moreover, SWIR’s trailing-12-month EV/S ratio of 1.29x is higher than CAMP’s 1.26x.

So, CAMP is relatively affordable here.

POWR Ratings

CAMP has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. On the other hand, SWIR has an overall rating of D, which translates to a Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

CAMP has a C grade for Growth. However, SWIR has a D grade for Growth.

Moreover, CAMP has a grade of C for Quality. On the other hand, SWIR has a Quality grade of D.

Of the 55 stocks in the Technology – Communication/Networking industry, CAMP is ranked #43. In comparison, SWIR is ranked #46.

Beyond what I’ve stated above, we have also rated the stocks for Momentum, Value, Stability, and Sentiment. Click here to view all the CAMP ratings. Also, get all the SWIR ratings here.

The Verdict

The communication market is expected to grow exponentially with increasing demand for advanced technologies to facilitate remote working. However, I don’t believe CAMP or SWIR are good buys at current prices.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Technology – Communication/Networking industry here.

CAMP shares were trading at $7.52 per share on Monday afternoon, down $0.09 (-1.18%). Year-to-date, CAMP has declined -24.19%, versus a 29.09% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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