3 Reasons Juniper Networks Is a Buy Today

Consistent growth along with free cash flow that beats its peers, yeah buying Juniper sounds like a good idea.

May 25, 2014 at 2:00PM

Investors are faced with multiple choices in the networking business, but Juniper Networks (NYSE:JNPR) seems to offer investors the best combination of yield, growth, and value. While analysts are calling for much faster earnings growth from peers like Alcatel-Lucent (NYSE:ALU) and Nokia Corporation (NYSE:NOK), there are three solid reasons that Juniper is the stock to buy today.

The top line is the top reason
It might sound simplistic, but in many cases if investors are faced with several choices, the company with the best top line growth is a good place to start. In the technology field, companies that grow revenue are prized and those with stalled revenue growth are branded as failures.

It's no secret that the convergence of big data, social media, and the move toward digital distribution creates a nearly constant need for new and improved networking equipment. In theory, there should be enough sales for multiple companies to report significant growth.

However, between Alcatel-Lucent, Juniper, and Nokia, only Juniper is reporting consistent growth across the majority of its businesses. In fact, in the last quarter, Juniper reported that more than 88% of the company's revenue increased by at least 6%. This cross-division strength led Juniper to a 10% annual increase in overall revenue.

To say that Alcatel-Lucent and Nokia lagged Juniper's top line growth is a massive understatement. While Alcatel-Lucent did report growth from just under half of its businesses, the overall result was essentially flat revenue on a year-over-year basis. Nokia did significantly worse with overall revenue declining by 15%. If you are looking for a good reason to buy Juniper today, the company's superior top line growth seems like a good place to start.

From top to bottom
It's true that some companies are able to grow their revenue yet report insignificant or a complete lack of free cash flow. Fortunately for Juniper shareholders, Juniper's top-line growth also translates into significant cash flow as well.

In fact, one of the best ways to compare companies in the same industry is by comparing their core free cash flow to their revenue. This measure of core free cash flow per dollar of sales gives investors an apples-to-apples comparison.

Juniper produced significantly more free cash flow from each dollar of sales relative to its competition. In the most recent quarter, Juniper generated $0.19 in free cash flow per dollar of sales. Looking at Alcatel-Lucent, the company was free cash flow negative and doesn't expect to regain free cash flow until 2015.

Nokia produced positive free cash flow, but nowhere near the level of Juniper's production. At $0.05 of core free cash flow per dollar of sales, the comparison to Juniper is no comparison at all. Juniper is outperforming its peers on a core free cash flow basis, and that is a second reason to buy the stock.

Spending on the future too
The third reason investors should consider buying Juniper today is the company continues to spend heavily on research and development. Along with death and taxes, there is nothing as sure as the fact that technology companies must spend on research and development if they hope to survive in the future.

While networking companies generally spend heavily on R&D, Juniper is leading its peers by this measure as well. In the current quarter, Juniper spent 23% of its revenue on R&D. Though Nokia was close at 22%, and Alcatel-Lucent put up a good fight at 18%, as we've seen neither company generates the cash flow of Juniper.

Final thoughts
The bottom line is, Juniper is growing revenue faster, generating more free cash flow, and spending more on R&D than its peers. When you combine these traits with a newly minted dividend and a renewed commitment to share repurchases, you get more than enough reasons to buy the stock.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Chad Henage has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers