JDS Uniphas-ing Out Stock

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Despite all the talk of constriction in the credit markets, Wall Street's buyback binge continues. Tech firms have been particularly active, and yesterday, JDS Uniphase (Nasdaq: JDSU) was the latest big name in tech to announce a stock repurchase program. Management aims to remove $200 million worth of its shares from the public markets over the next two years. Which brings us to our two key questions:

Can it pay?
Easily. JDS has nearly $1 billion in cash in the bank today. Granted, the company also carries nearly $600 million in debt, but its cash on hand would suffice to cover the entire buyback plan immediately -- twice. What's more, JDS generated free cash flow of roughly $128 million over the last 12 months. If it keeps churning out cash at that rate, further buybacks could be in the offing.

Should it pay?
But would that be a good idea? To "quality check" the Foolishness of JDS' decision, let's see how the stock stacks up against a few of its competitors:

	P/E	Price-to-Free Cash Flow	Projected Growth Rate
JDS Uniphase	n/a	20	24%
Agilent (NYSE: A)	23	17	14%
Coherent (Nasdaq: COHR)	110	25	10%
Finisar (Nasdaq: FNSR)	n/a	n/a	18%
Bookham (Nasdaq: BKHM)	n/a	n/a	15%

P/Es are looking mighty dicey in this field of business, with only Agilent sporting anything close to a reasonable-looking number, and most everyone else lacking the positive trailing-12-month earnings necessary for calculating a non-nonsensical P/E. But fear not, dear Fool. We've got a better measure of profitability in our toolkit, and it's telling us that not only is JDS right to be buying back shares today -- it's also the cheapest stock of the bunch.

JDS is now selling for roughly 20 times free cash flow, which looks mighty attractive relative to analyst projections of 24% growth for the stock. Agilent's almost as cheap, but sits just the wrong side of the 1.0 P/FCF/G divide, while Coherent seems even more drastically overpriced. (And Finisar? Bookham? Don't even get me started on these profitless wonders.)

From a strict valuation perspective, JDS looks like a buy, especially in an industry where such values are few and far between.

For related Foolishness, read:

• JDS Uniphase Is Back to Normal
• Get Ready for the Bounce
• JDS Uniphase Sees the Light