Investors in Ubiquiti Networks (NASDAQ: UBNT), which we introduced in the November 2014 issue of the Investor Advisory Service, have experienced their fair share of gut-checks over the past year. We recommended the disruptive wireless networking solutions provider headed by visionary Robert Pera with the caveat that results would be lumpier than the typical companies we cover: “Do be a little careful with your growth projections however, because the company’s results have been very lumpy historically. Sales actually decreased for three straight quarters two years ago. We project 20% average annual growth going forward, but we don’t expect it to be a smooth ride. Most of the company’s products would be properly classified as capital goods, and capital goods almost always move in volatile cycles.”

And a lumpy ride it has been. Only a few days after we profiled the company in the newsletter, Ubiquiti reported fiscal 1Q15 results that missed management’s guidance badly. Revenue growth of 16% fell far short of the low 20% guidance and EPS actually fell 7% compared to guidance for mid-to-high teens growth. Founder and CEO Robert Pera has always insisted visibility is difficult-to-impossible in Ubiquiti’s end markets, but missing guidance provided just 3 months prior by that much called into question his credibility a bit. The market voted with its feet and the stock plunged nearly 20% on the report. We noted a couple positives in the quarter including the company expanding its reach by signing two new large distributors in China and India, and the 20%+ growth in the faster-growing, less cyclical Enterprise Technology business segment.

UBNT stock is a popular trading vehicle on the street, thanks to its preponderance of 5%+ moves that are uncorrelated with the general market and a lot of times accompanied by no news. Case in point, after bottoming in the high $20s after the above-mentioned weak results, the stock surged back to $34 on what appeared to be nothing more than a short-covering rally last October. The stock price promptly deflated back to the mid-to-high $20s after Goldman Sachs opportunistically put a Sell rating on the stock, citing increased emerging market challenges since Ubiquiti’s guide-down in the prior quarter. The stock has continued to yo-yo furiously ever since as traders battle it out. Short interest has hovered in the 30-40% range all year, which seems to be providing a floor for the stock in the high $20s. Meanwhile every surge in the stock price is met with an analyst downgrade (over a half dozen major brokerages have downgraded the stock year-to-date), providing a ceiling in the mid $30s.

Inconsistent underlying business results haven’t helped UBNT break out of its trading range either. After missing its guidance badly in fiscal Q1, the company beat estimates handily on both sales and EPS in Q2, each growing 11% over strong prior year comparisons. Ubiquiti then missed its own guidance badly again in Q3 as revenues fell 1% and EPS declined 8%. We liked the underlying mix of the quarter’s results though, as the more cyclical and competitive Service Provider Technology segment was soft, but the higher-potential Enterprise Technology segment grew 50%+ and total revenue grew 30% annually on a two-year stacked basis. Continuing the pattern, Q4 results were lackluster, but at least were in-line with management’s subdued guidance. Revenues fell 7% and adjusted EPS declined 9%. The adjustment in EPS was due to an extraordinarily embarrassing corporate blunder that called into question the company’s internal controls. Ubiquiti’s accounting department was tricked into transferring $47 million in cash from the company’s Hong Kong subsidiary to outside bank accounts controlled by criminals.

All these ups and downs leave shares at a current price of $30. After underperforming the past year, UBNT’s risk/reward remains attractive at a P/E ratio of 15, but the stock remains a speculative investment. Risks are substantial and include near-term currency and emerging market issues as well as steep competition from the Ciscos of the world and everyone else trying to build a better mousetrap. However, on the flip side the potential reward is also substantial if Pera and his team of elite engineers can continue to roll out new best-in-class wireless networking devices, enterprise surveillance systems, and solar energy solutions at disruptive price points that capture mass adoption in the long run.