PKT Procera Networks, Inc.

Selling on the news doesn't always work. Procera Networks (PKT) is a prime example of a stock that continues to move higher after an earnings announcement. With a big earnings surprise, a great growth outlook, and rising estimates it isn't hard to see why.

Company Description

Procera provides intelligent policy enforcement solutions that allow network operators control of and visibility into their networks. Customers include businesses, governments, educators, mobile providers, and any entity operating a private network.

Record-Setting Quarter

On Nov 8 Procera shares spiked thanks to a fantastic quarterly report the day before. Revenue surged 158%, to $12.2 million and bookings were up 360%, to $21 million.

While the company gained several new customers, the top line also grew thanks to increasing orders from current clients. Non-GAAP net income came in at $2.5 million, up from a $382,000 loss a year ago.

Earnings worked out to $0.14 per share, convincingly ahead of the 4-cent loss analysts were expecting. That gave Procera back-to-back surprises. Given the results, the company went on to raise full-year guidance as well.

Big Order

Shortly after the earnings release, Procera announced a $3 million follow-on order. Combine that with the quarterly results and you can see why analysts were eager to raise estimates.

The Zacks Consensus Estimate for this year rose 22 cents, or $0.26. Next year's average projection is up 7 cents, to $0.31. In 2010 Procera lost $0.27 per share, so this has been quite a turnaround.

But...

Valuations are high. If estimates keep growing the share price should as well. But, with a P/E north of 50 times, a PEG nearing 4, a price to sales of 5.9, and price to book of 4.9, it could be a bumpy ride if the earnings growth tappers.

The Chart

Shares of PKT blew right past the 52-week high on after the earnings report and show no signs of stopping. Often after a big jump there is some profit taking or selling on the news, but this Zacks #1 Rank (Strong Buy) is off to the races right now.