How Extreme Networks, Inc. Stock Rose 20% in January

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What happened

Shares of Extreme Networks (NASDAQ: EXTR) gained 20% in January, according to data from S&P Global Market Intelligence. The networking hardware specialist's big leap rested on its inclusion in a prestigious market index -- but the joy didn't last long.

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So what

Extreme Networks was having a quietly positive month, trading just above the S&P 500 market index until Jan. 30. That's when the company was chosen to join the S&P SmallCap 600 market index, and the stock rose as much as 11.5% on the news.

The gains didn't last long. First, Extreme Networks was caught up in the general market meltdown of Feb. 5. Then the company reported second-quarter results, beating Wall Street's earnings targets while falling short on the top line. Share prices fell more than 14% on this mixed report, and Extreme Networks is now trading 7% lower year to date.

Now what

Don't cry for Extreme Networks investors, though. At the end of January, share prices had nearly tripled in 52 weeks. It didn't take much of a miss to make some investors take some profits off the table.

Looking ahead, the buyout binge of 2017 has left Extreme Networks in position to challenge Hewlett-Packard Enterprise's (NYSE: HPE) Aruba Networks and Cisco Systems (NASDAQ: CSCO) for contracts across the enterprise networking sector. The stock may look expensive, trading at 730 times trailing earnings today, but the P/E ratio drops all the way to 10.6 if you use forward estimates instead.

Extreme Networks is going places, and I think we'll see it in these monthly top-performer lists again.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.

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