Two roads diverged in a wood, and I--
I took the one less traveled by,
And that has made all the difference.

            -- Robert Frost, "The Road Not Taken"

On April 23, network equipment designer Juniper Networks (NASDAQ:JNPR) released first-quarter earnings for the period ending March 31. The company is traveling down an underappreciated road, with quiet confidence. Yes, National Poetry Month is still with us for another few days.

  • The operating margin was hurt by $12 million in charges related to tax preparation and the recently closed options accounting investigation. Sales and marketing spending grew faster than sales at 15%, and R&D growth outpaced all the rest at almost 25%. Some people see less net income -- I see a company investing in its own future.
  • That point is countermanded to some degree by capital expenditures cut in half. However, Juniper outsources its manufacturing and remains mostly a design shop, so capex isn't as important as research here.
  • The balance sheet is starting to look good. Is Juniper looking for acquisition opportunities, or maybe a future dividend? Only time will tell.
  • This is but a lowly one-star CAPS stock today. Do you agree? Disagree? Log on today and share your expertise, opinion, and anectodal experiences, all for the enrichment of Fooldom as a whole.

(Figures in millions, except per-share data)

Income Statement Highlights

Q1 2007

Q1 2006

Change

Sales

$626.9

$566.7

10.6%

Net Profit

$66.6

$75.8

(12%)

EPS

$0.11

$0.13

(15.4%)

Diluted Shares

604.9

603.6

0.2%

Get back to basics with the income statement.

Margin Checkup

Q1 2007

Q1 2006

Change*

Gross Margin

66.2%

66.8%

(0.7)

Operating Margin

9.7%

16%

(6.4)

Net Margin

10.6%

13.4%

(2.7)
*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q1 2007

Q1 2006

Change

Cash + ST Invest.

$2,464.6

$1,414.9

74.2%

Accounts Rec.

$257.8

$304.8

(15.4%)

Liabilities

Q1 2007

Q1 2006

Change

Accounts Payable

$180.5

$160.3

12.6%

Long-Term Debt

$399.9

$399.9

0%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q1 2007

Q1 2006

Change

Cash From Ops.

$152.6

$138.6

10.2%

Capital Expenditures

$32.4

$18.2

77.6%

Free Cash Flow

$120.3

$120.3

(0%)

Owner Earnings

$81.0

$99.7

(18.8%)

Free cash flow is a Fool's best friend.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.