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Technology stocks are a volatile bunch. If we learned anything from the dot-com bubble bursting at the turn of the century, it’s that investors can’t get too high on a technology stock based purely on its potential. So take caution with the following three tech stocks. All of them are relatively young companies that made huge gains in 2011.
Each of them performed remarkably well over the past year – enough that it’s worth taking notice of them. But as the dot-com crash more than a decade ago taught us, we should add a dose of caution as we take notice of these fast-rising stocks.
1. eGain Communications Corporation (Nasdaq: EGAN)
Market Cap: $173.5 million
2010 Closing Price: $1.20
2011 Closing Price: $6.91
2011 Gains: 411.9%
P/E (ttm): 43.7
It was a big year for eGain, as this business software company was upgraded to the Nasdaq exchange from an over-the-counter listing in October and saw its stock price more than quadruple. eGain’s software products are designed to help businesses get to know their customers better through analytics. While its revenues fell off a bit in the July through September quarter, eGain still had about $6 million in free cash flow through the first nine months of the year.
2. Majesco Entertainment (Nasdaq: COOL)
Market Cap: $100.8 million
2010 Closing Price: $0.79
2011 Closing Price: $2.44
2011 Gains: 216.9%
P/E (ttm): 10.91
Majesco is a video game maker, and the company’s bread and butter in 2011 was “Zumba Fitness”. Sales of the popular Xbox and Wii game exploded this year, helping Majesco’s stock beat analysts’ earnings expectations all year and make the company profitable. With no debt and a strong balance sheet, Majesco is actually trading at less than 11 times earnings – a good sign for a small but growing stock.
3. Procera Networks (Nasdaq: PKT)
Market Cap: $221.5 million
2010 Closing Price: $6.40
2011 Closing Price: $15.58
2011 Gains: 151.3%
P/E (ttm): 83.8
Like eGain, Procera’s stock just upgraded to the Nasdaq exchange at the tail end of a blowout year. The company is a provider of network traffic awareness, analysis and control solutions. Procera’s stock surged as the company demonstrated robust revenue growth of 157% in 2011 thanks largely to increased demand for its products among smartphone users. While Procera’s price-to-earnings ratio appears troubling, it’s fairly modest considering the company just became profitable this year.