Joy Global Inc. (JOY), F5 Networks, Inc. (FFIV): The Two Best Rebound Stocks of 2013

This company, a leader in the delivery of network software that controls applications, security software and other mission-critical systems across an enterprise, has surely benefited from the trend. Sales have surged from $400 million in fiscal 2006 to nearly $1.4 billion in fiscal 2012.

Yet a move to upgrade many of its software components this year has led to a slowdown in sales that has led some to wonder if this company is now too big to grow at a solid pace. After all, sales are expected to rise just 5% in the current fiscal year (to around $1.46 billion).

Yet that growth slowdown may prove short-lived. In the current fiscal fourth quarter, F5 Networks, Inc. (NASDAQ:FFIV) is releasing “Big IQ,” which should give IT managers much more functionality as they manage massive networks. That release, along with some key hardware upgrades on F5 Networks, Inc. (NASDAQ:FFIV)’s “5000” and “7000” systems, is expected to lead to double-digit sales growth in the fiscal year that starts in October.

Despite the recent slowdown, analysts at Merrill Lynch remain bullish: They think “the company maintains one of the better (long-term) growth rates in the industry and one of the better marginstructures (80% gross margins and 32-33% operating margins),” which underpins their $95 price target. That’s where shares stood back in early March, before a recent pullback below $70.

As a further catalyst, Cisco Systems, Inc. (NASDAQ:CSCO) has recently exited the $200 million application delivery control (ADC) market, and “F5 Networks, Inc. (NASDAQ:FFIV) is in the best position to capture the lion’s share of this incremental share of this market,” according to analysts at Morningstar, who peg the fair value of this stock at $100.

Risks to Consider: These stocks have been weak in an otherwise strong market. If the market retrenches from here, it will be hard for these stocks to regain traction, so they may be best regarded as long-term opportunities.

Action to Take –> Though a number of companies in the group above face serious challenges, both Joy Global Inc. (NYSE:JOY) and F5 Networks, Inc. (NASDAQ:FFIV) have proven solid track records and continue to generate very strong cash flows, even as sales growth has hit a current rough patch.

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