Ceragon Networks (NASDAQ:CRNT) high volatility trend continues

67% of stocks are less volatile than Ceragon, and 77% of all traded equity instruments are projected to make higher returns than the company over the 90 days investment horizon. While many risk-averse private investors are getting carried away by overanalyzing technology space, it is reasonable to review Ceragon Networks. We will break down how risky is to take a position in Ceragon Networks at this time.
Published over a year ago
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Reviewed by Gabriel Shpitalnik

The company currently holds 17.88 M in liabilities with Debt to Equity (D/E) ratio of 0.12, which may suggest Ceragon Networks is not taking enough advantage from borrowing. Ceragon Networks has a current ratio of 1.99, which is within standard range for the sector. Ceragon Networks holds a performance score of 11 on a scale of zero to a hundred. The firm shows a Beta (market volatility) of 0.5215, which signifies possible diversification benefits within a given portfolio. Let's try to break down what Ceragon's beta means in this case. As returns on the market increase, Ceragon Networks returns are expected to increase less than the market. However, during the bear market, the loss on holding Ceragon Networks will be expected to be smaller as well. Although it is vital to follow Ceragon Networks historical returns, it is good to be conservative about what you can do with the information regarding equity current trending patterns. Our philosophy towards foreseeing future performance of any stock is to look not only at its past charts but also at the business as a whole, including all fundamental and technical indicators. To evaluate if Ceragon Networks expected return of 1.29 will be sustainable into the future, we have found twenty-seven different technical indicators, which can help you to check if the expected returns are sustainable. Use Ceragon Networks value at risk, as well as the relationship between the kurtosis and price action indicator to analyze future returns on Ceragon Networks.
Volatility is a rate at which the price of Ceragon Networks or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Ceragon Networks may increase or decrease. In other words, similar to Ceragon's beta indicator, it measures the risk of Ceragon Networks and helps estimate the fluctuations that may happen in a short period of time. So if prices of Ceragon Networks fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is Ceragon Networks's Liquidity

Ceragon Networks financial leverage refers to using borrowed capital as a funding source to finance Ceragon Networks ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Ceragon Networks financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Ceragon Networks' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Ceragon Networks' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Ceragon Networks's total debt and its cash.

Ceragon Networks Volatility Drivers

Ceragon Networks unsystematic risk is unique to Ceragon Networks and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Ceragon Networks you can also buy Desktop Metal. You can also mitigate this risk by investing in the information technology sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Ceragon Networks important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Ceragon Networks income statement and balance sheet. Here are more details about Ceragon volatility.
0.160.940.290.860.530.53-0.010.950.88-0.460.110.02-0.12-0.63-0.36-0.04
0.160.29-0.060.29-0.080.310.56-0.02-0.09-0.380.65-0.4-0.87-0.66-0.060.81
0.940.290.110.920.420.61-0.080.890.76-0.660.310.1-0.3-0.59-0.510.13
0.29-0.060.11-0.160.14-0.50.290.330.40.28-0.28-0.30.25-0.34-0.25-0.17
0.860.290.92-0.160.450.82-0.060.790.68-0.640.380.16-0.31-0.49-0.370.1
0.53-0.080.420.140.450.09-0.450.370.32-0.32-0.04-0.220.39-0.31-0.28-0.35
0.530.310.61-0.50.820.090.130.470.45-0.420.360.29-0.45-0.22-0.030.25
-0.010.56-0.080.29-0.06-0.450.13-0.050.070.270.19-0.18-0.57-0.350.270.5
0.95-0.020.890.330.790.370.47-0.050.95-0.320.020.08-0.03-0.5-0.41-0.14
0.88-0.090.760.40.680.320.450.070.95-0.05-0.12-0.020.09-0.4-0.32-0.18
-0.46-0.38-0.660.28-0.64-0.32-0.420.27-0.32-0.05-0.54-0.330.420.390.44-0.23
0.110.650.31-0.280.38-0.040.360.190.02-0.12-0.540.06-0.57-0.45-0.270.42
0.02-0.40.1-0.30.16-0.220.29-0.180.08-0.02-0.330.060.080.370.06-0.26
-0.12-0.87-0.30.25-0.310.39-0.45-0.57-0.030.090.42-0.570.080.48-0.03-0.83
-0.63-0.66-0.59-0.34-0.49-0.31-0.22-0.35-0.5-0.40.39-0.450.370.480.1-0.25
-0.36-0.06-0.51-0.25-0.37-0.28-0.030.27-0.41-0.320.44-0.270.06-0.030.1-0.04
-0.040.810.13-0.170.1-0.350.250.5-0.14-0.18-0.230.42-0.26-0.83-0.25-0.04
Click cells to compare fundamentals

Breaking it down a bit more

The entity reported the previous year's revenue of 260.14 M. Net Loss for the year was (14.87 M) with profit before overhead, payroll, taxes, and interest of 96.84 M.
 2018 2019 2020 2021 (projected)
Revenues USD343.87 M285.58 M257.02 M281.77 M
Revenues343.87 M285.58 M257.02 M281.77 M

Our perspective of the newest Ceragon Networks gain

Newest jensen alpha is at 0.27. As of the 15th of January 2021, Ceragon Networks shows the Mean Deviation of 2.61, downside deviation of 3.31, and Risk Adjusted Performance of 0.0945. Ceragon Networks technical analysis gives you the methodology to make use of historical prices and volume patterns to determine a pattern that approximates the direction of the firm's future prices. Put another way, you can use this information to find out if the firm will indeed mirror its model of historical prices and volume momentum, or the prices will eventually revert. We were able to analyze and collect data for nineteen technical drivers for Ceragon Networks, which can be compared to its rivals. Please confirm Ceragon Networks standard deviation, value at risk, as well as the relationship between the Value At Risk and kurtosis to decide if Ceragon Networks is priced correctly, providing market reflects its regular price of 4.85 per share. Given that Ceragon Networks has jensen alpha of 0.2682, we suggest you to validate Ceragon Networks's prevailing market performance to make sure the company can sustain itself at a future point.

The Bottom Line

Whereas some firms within the communication equipment industry are still a little expensive, even after the recent corrections, Ceragon Networks may offer a potential longer-term growth to private investors. The bottom line, as of the 15th of January 2021, our ongoing 30 days buy-hold-sell recommendation on the firm is Sell. We believe Ceragon Networks is currently overvalued with very low probability of distress for the next two years.

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Editorial Staff

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