Here's Why the Best Is Yet to Come for CalAmp Corp.

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By most metrics, Internet of Things (IoT) provider CalAmp (NASDAQ: CAMP) appears woefully overvalued. So why is CalAmp's stock continually bumping against its 52-week high of $24.68 a share? The good news for investors in search of a pure growth alternative is that there are multiple reasons CalAmp stock has not only skyrocketed 55% in 2017 but still has room to grow.

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For those not familiar with CalAmp, its suite of offerings include both stationary and mobile telematics -- or long-distance IoT network connectivity and data analysis -- along with cloud Software-as-a-Service (SaaS) solutions. CalAmp's primary markets include connected cars and industrial IoT.

Picking up steam

While both of CalAmp's target markets are expected to explode in the coming years, industrial IoT is already leading the charge. According to one study, the global industrial IoT market will generate more than $933 billion by 2025, and by most estimates, connected cars won't be far behind.

As CalAmp demonstrated again last quarter, not only is it growing on both the top and bottom lines, but it's in the early stages of what is quickly becoming a hypergrowth mode. Less its now-divested satellite division, CalAmp's $89.8 million in revenue last quarter was a 7% improvement year over year.

Impressively, CEO Michael Burdiek and team were able to grow sales while keeping a close eye on operating expenses. Last quarter's $33.7 million in overhead was flat compared to a year ago, with the only bump in spending coming from CalAmp's research and development efforts.

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The end result was $0.34-a-share profit, well above last year's $0.01 a share. It should be noted that CalAmp's bottom line benefited from a $15 million payment it received as part of a legal settlement. Burdiek said CalAmp should pocket another $31 million in payments over the next several quarters.

At a market capitalization of $800 million, CalAmp's balance sheet is also remarkably strong. CalAmp boasts $130 million in cash and short-term securities, with the only ding being $150.5 million in senior convertible notes, which, at a mere 1.625%, is hardly worrisome. Last quarter's deferred revenue of $15.8 million was an 8% increase from a year ago, which bodes well for the future.

But even CalAmp's pipeline as measured by its jump in deferred revenue takes a backseat to the multiple wins last quarter.

Let's get this party started

CalAmp is hardly alone in the fast-growing IoT marketplace. With the likes of German behemoth Ericsson (NASDAQ: ERIC) and Finland-based Nokia also diving headlong into the IoT race. But considering its size relative to its larger rivals, CalAmp's upside dwarfs that of its European competitors.

Not to mention that as CalAmp continues to grow, peers including Ericsson are on the downswing. Last quarter, Ericsson's total sales slumped 6%, and its networking unit reported a 4% drop in revenue. As for CalAmp, it shared a multitude of positives that will keep its momentum going.

One of CalAmp's primary customers has long been industrial giant Caterpillar. CalAmp expanded its relationship with Caterpillar last quarter, which resulted in a 7.4% jump in revenue sequentially to a record $10.5 million. CalAmp also added another "blue-chip customer" in the quarter that constituted the largest SaaS contract in its history.

Thanks to the new SaaS contract, CalAmp's telematics and SaaS segment revenue climbed over 7% and should keep rising in the coming quarters. Mobile resource management (MRM) sales really took off in the second quarter, soaring 29% to a record $38.1 million.

Final thoughts

The positive momentum CalAmp is enjoying is just the beginning. In addition to the aforementioned wins, it also began shipping solutions to another new-ish industrial giant, as well as signing a contract with a significant South American Lojack licensee.

Growth investors can throw traditional valuations and metrics out the window. CalAmp is in the early stages of growth, with the best yet to come.

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Tim Brugger has no position in any of the stocks mentioned. The Motley Fool recommends CalAmp. The Motley Fool has a disclosure policy.