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Cramer: I'd Call My Broker About This Stock

(Click for video linked to a searchable transcript of this Mad Money segment)

Cramer is pretty excited about a new stock coming to market.

The company is called Gigamon, which will trade under the symbol GIMO.

"I think you should call your broker immediately so that you can try to get some shares in theIPO," Cramer said with customary enthusiasm. Gigamon is going to have a small initial public offering that I expect to be red hot."

So what is Gigamon and why does Cramer think it could spike so hard right out of the gate?

The company is involved in a niche area of technologyin which their products allow large and medium sized business do a better job of managing and monitoring their networks. Essentially, Gigamon's customers get more performance out of less network infrastructure, which can generate significant cost savings.

It appears Gigamon's services are starting to catch on.

"The company already has over a thousand customers, and they've experienced a ton of repeat buying—a majority of Gigamon's sales in any given quarter come from existing customers who are making additional purchases," Cramer explained.

Of course none of this matters unless the business is run well. And in the case of Gigamon, Cramer thinks the numbers speak volumes.

"Gigamon's revenues have grown at a 40% clip over the last two years, and recently, they've accelerated, as the company posted 55% revenue growth in its most recent quarter," Cramer explained

And here's the the piece de resistance - Gigamon has been profitable for the past five years," Cramer added. That's often not the case in technology IPOs.

Don Bayley | E+ | Getty Images

Looking at price levels, Gigamon plans to raise $128 million by offering 6.8 million shares at a price range of $18 to $20, however, Cramer thinks it's acceptable to pay as much as $25, which would translate into about 3 times next year's sales.

"But remember, with every tech IPO we've seen this year, virtually all of the gains have come from the first day spike. Therefore I think you need to handle Gigamon with care. If you can get in on the deal, then as long as it prices below $25, I bet you'll do well."

"However, if you can't get in on the deal, then please just say you missed it and don't try to buy Gigamon in the aftermarket," he added. "Let the stock cool off for a few days, and then take another look."

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It's worth noting that Cramer is also watching the IPO of Coty, which is scheduled to begin trading this week, as well.

"Coty plans to price its shares somewhere between $16.50 and $18.50, and at the midpoint, the stock would be trading at just 20.5 times earnings," Cramer said.

The Mad Money host has crunched the numbers and found the industry average is about 22 times earnings with Este Lauder and L'Oreal both selling for 25 times earnings.

Unfortunately, the lower multiple may be warranted.

"Over the nine months ending in March, Coty's revenue growth was flat, in part because of weakness in Europe, which makes up a substantial portion's of their business," Cramer said.

However, Cramer thinks the company's fortunes could take a turn for the better, after the IPO.

"After the IPO the company expects to have $1.8 billion in net debt. Coty throws off a ton of cash flow, so the plan is to use the cash to pay down the debt and also pay out a modest dividend," he said.

"Also there's also a chance that Coty could do a big, transformational acquisition, like they tried last year with Avon," he added.

All told, Cramer thinks there's every reason to keep a close eye on this stock. However, unless you're a seasoned pro, he's cautious of Coty during its first days on the market.

"This is one where I think you watch and wait to see how much the company can improve after it comes public," Cramer said.

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