How Low Can NetApp Go?

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Shares of NetApp (NAS: NTAP) hit a 52-week low yesterday. Let's look at how it got here and whether dark clouds are ahead.

How it got here
The data storage specialist got clobbered when it reported second-quarter earnings in November. Revenue fell short of what the market was expecting, and then-CFO Steven Gomo said the miss was attributed to slow ordering activity at just a fraction of its biggest customers.

The next quarter came in ahead of what the Street was looking for, sending shares upward in the process. Revenue jumped by 21.4% to $1.6 billion, outpacing larger rival EMC's (NYS: EMC) sales growth in the same quarter.


That was back in February, and April saw a handful of brutal tech earnings reports from several IT-centric names that didn't do the sector any favors. Then earlier this month Cisco Systems CEO John Chambers again came out with gloomy words, further sparking fears of a slowdown in technology spending.

How it stacks up
Let's see how NetApp stacks up with some of its data storage peers.

NTAP Chart

NTAP data by YCharts

We'll add some fundamental metrics into the mix for a deeper read.

Company

P/E (TTM)

Sales Growth (MRQ)

Net Margin (TTM)

ROE (TTM)

NetApp22.321.4%9.8%15.5%
EMC22.310.6%13.3%13.7%
Hewlett-Packard (NYS: HPQ) 7.7(7.0%)4.8%14.8%
IBM (NYS: IBM) 14.70.3%15.0%74.0%

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter.

NetApp is putting up faster sales growth than its closest competitor, EMC, and both sport about the same valuation relative to earnings. EMC is more profitable, but remember that some of those results are tied to its majority-owned virtualization subsidiary VMware. HP and IBM also play in this sector, but both of those companies offer much more beyond just data storage.

What's next?
The data storage industry is set to continue growing, as our data needs skyrocket. Big data ain't going anywhere anytime soon, and NetApp should enjoy the ride. The company is also set to report earnings tomorrow, so hopefully the results can turn the ship around.

Add these storage companies to your watchlist to get the latest updates on the sector.

At the time this article was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Cisco Systems, EMC, and International Business Machines. Motley Fool newsletter services have recommended buying shares of VMware. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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