Measured Approach

COMTECH TELECOM CORP. (NASDAQ: CMTL) Data as of: 04/23/2010

Industry: Communications Equipment

Current Data
Current Price $32.55 PEG 1.8X
Market Cap ($M) $920.2 EPS TTM ($) $1.31
Shares Outstanding (M) 28.2 P/E TTM 24.8X
Institutional Holdings % 95.0% EPS Est. 2010 ($) $1.95
Insider Holdings % 2.5% P/E Est. EPS 16.7X
Beta 0.39 Target Value ($) $41.0
0
Latest Quarter Reported 01/31/201 Dividend Yield % 0.00
0

Comtech Telecommunications Corporation “designs, develops, produces and markets

innovative products, systems and services for advanced communications solutions. The
Company conducts business through three complementary segments:
Telecommunications Transmission, Mobile Data Communications, and RF Microwave
Amplifiers.”

The telecommunications transmission segment consists of satellite earth station

equipment with satellite modems and over-the-horizon microwave systems. In 2Q10,
telecom transmissions contributed 34.1% to total revenue.

The mobile data communications segment consists primarily of MTS and BFT real-time
and secure systems sold to the U.S. Army. This segment also includes microsatellite
systems and related components. Mobile data contributed 49.2% to total revenue in
2Q10.

The last segment, RF microwave amplifiers contributed an additional 16.7% to total

revenue.

Overall, 64.7% of total sales was derived from the U.S. government and an additional
29.2% came from international sales. The balance, 6.1%, came from domestic
commercial sales.

Recent Developments

Comtech Telecommunications Corp announced on April 5, 2010 that its

Santa Clara, California-based subsidiary, Comtech Xicom Technology, Inc.
and its Tempe, Arizona-based subsidiary, Comtech EF Data Corp.,
received satellite communications equipment orders totaling $12.1
million from a major government prime contractor.

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
 The orders are for follow-on procurements of high-power tri-band
amplifiers, high-power Ka-band amplifiers and satellite earth station
modems for transportable USAF satellite terminals and will be utilized to
expand an existing military network. Deployed throughout the world,
these terminals offer users the flexibility of accessing both military and
commercial satellites.

On March 31, Comtech Telecommunications Corp. announced that

Comtech Systems, Inc., its Florida-based subsidiary, received a $35.4
million contract from a domestic prime contractor to provide system
design and telecommunications transmission equipment for use in a
North African government's communications network.

Comtech Telecommunications Corp. announced today that its Maryland-

based subsidiary, Comtech Mobile Datacom Corporation, received an
order totaling $1.4 million under its Movement Tracking System, or MTS
contract, with the U.S. Army. Total orders received to date against the
$605.1 million MTS contract increased to $595.2 million.

The order is Phase II of ongoing efforts to complete migration of all RFID

processes to the new international standard ISO/IEC 18000-7. Whereas
Phase I migration efforts involved modifications to the transceiver's
firmware to enable it to read RFID tags operating under the ISO 18000-7
standard, Phase II encompasses modifications to the MTS platform
application program, network, and other interfaces. Upon completion of
the migration, the MTS mobile RFID capability will extend to all active
RFID tags built to comply with the international standard.

By The Numbers

Sales for the TTM ending 1/10 are down to $555.5 million for FY09 levels of
$586.6 million. Y-O-Y, sales are down 7.5%. However, we are beginning to see
pick-up. In the quarter ending 1/10, sales were $171.1 million as compared to
the year-ago quarter of $143.9 million.

At the segment level, we are seeing changes too. In 2Q10, sales in the telecom
transmission segment declined to $58,463 million from $69,523 million in 2Q09.
There was a dramatic increase in the mobile data segment. Sales increased from
$38,871 million in 2Q09 to $84,186 million in 2Q10. There was a 20% decrease in
the RF microwave segment. In 2Q10, sales decreased to $28,483 million from
$35,492 in 2Q09.

EPS for the TTM ending 01/10 are down to $1.31 compared to the year-ago level
of $2.57. In 2Q10, EPS was $0.51 as compared to $0.46 in 2Q09.

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© Copyright 2009 Ronald Sommer. All Rights Reserved.
Earnings estimates for FY10 range from a low of $1.88 to a high of $2.28 with a
mean of $1.95. The Company provides guidance with a range of $1.85 to $1.95.
Estimates for FY11 range from $1.88 to $2.69 and average $2.20.

Gross margins for fiscal years 2005 to 2009 range from 40.7% to 44.2% and
average 42.16%. The gross margin for the TTM ending 01/10 is down to 37.4%.
We see similar patterns for operating margins and net margins.

The Company has a very strong balance sheet. The Company reports $514
million in cash which also represents approximately 55% of the current market
cap. With so much cash on hand, it is no surprise the Company has announced
its interest in making acquisitions.

The Company carries about $200 million in long term debt and $310.0 million in
total liabilities. The total liabilities to total assets ratio of 32%; long term debt to
capitalization ratio of 23.3% and long term debt to equity ratio of 30.3%.

At current EPS levels, valuation seems a little high at 24.8X. If the Company can
hit the average EPS estimate of $1.95, then the P/E of 16.7X seems reasonable.
Price to Book is 1.3X and Price to Tangible Book is 2.0X.

Conclusion

The Company has good fundamentals and upside of about 27% from current
levels. We think the current price is a little ahead of itself. We would wait for a
pullback to about $27 before buying.

Disclosure: Author has no financial interest in CMTL.

Please visit http://measuredapproach.wordpress.com for important disclosures.

© Copyright 2009 Ronald Sommer. All Rights Reserved.