Why Sierra Wireless May Be a Value Trap
Shares of Sierra Wireless (NASDAQ: SWIR) were down over 20% as the company missed both revenue and earnings expectations for the third quarter. Revenue fell 14.5% year over year to $174 million; Wall Street expected $191 million. Non-GAAP earnings in the third quarter last year were over $10 million, but this year plummeted to just $1 million.
While those results aren't good, so-called value investors may have noticed that Sierra Wireless actually trades below its book value, with a price-to-book ratio of 0.8. Benjamin Graham and Warren Buffett are both respected investors who have advocated buying stocks that trade below 1.2 book value -- making Sierra Wireless look like a steal at these levels. But there's more to investing than valuation metrics, and Sierra Wireless may actually be a value trap.
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Source Fool.com
