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Stock Analyst Update

Scientific-Atlanta's More than a Tad Too Steep

But demand for digital set-top boxes remains impressive.


What Happened?
Scientific-Atlanta (SFA) on Thursday announced record fiscal first-quarter bookings, revenue, operating profit, backlog, and cash. Revenue increased by 71% to $597 million, while the company's backlog increased to $889 million from $550 million a year ago. The performance was driven by continued strong demand by cable companies aggressively expanding their service offerings to boost sluggish sales growth. These offerings include broadband services that support digital cable and interactive TV services.

What It Means for Investors
We believe the company has a bright future because of surging demand for digital and interactive TV products and services. But although there is no questioning Scientific-Atlanta's impressive performance, at a P/E north 50, the company's shares are probably too expensive, in our opinion. 

Richard Wilson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.