Internet Explosion Boosts Israeli Telecom Firm (ECILF)
Wednesday, September 30, 1998
Dow theory sage Richard Moroney reports that heightened demand drove profits up 36% on a 21% revenue gain at ECI Telecom (ECILF). The Israeli company makes systems that enhance the efficiency of telecommunications networks. Booming Internet use is heightening demand for more network capacity, which in turn is fueling sales of ECI's digital circuit multiplication equipment (DCME). Service providers use DCME to speed up international, domestic long-haul, inter-city and leased lines. Contributing even more heavily to growth are ECI's networks based on the Synchronous Digital Hierarchy (SDH) standard. “A better product mix and efforts to hold down costs have helped push gross, operating and net margins into record or near-record territory,” Moroney says.
Stock in ECI took a tumble recently, and Moroney recommends the firm as undervalued. ECI has largely avoided the regional economic crisis as its Asian clients are mainly in China and the Philippines, both affected only by the downturn. Though major European customers, including Deutsche Telekom and France Telecom, are scaling back on expenditures, ECI management reports no slowdown in sight.
“With an expected annual earnings growth rate of 15-20%, these shares are cheap at just 12x expected 1998 earnings of $2.10,” Moroney says. ECI is one of his top buys for one-to-three year gains.
For more on Richard Moroney's recommendation see “Featured Report,” September 28, 1998, Dow Theory Forecasts. The weekly publication uses the time-tested Dow Theory to provide award winning stock picks and portfolios.
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