Ciena (NYSE:CIEN) was down in the dumps late last year as a meaningful slowdown in orders amid the novel coronavirus pandemic had derailed the company's sales and earnings growth. The stock struggled as management pointed to uncertainty in the business environment due to a cautious spending approach adopted by service providers that negatively impacted the rollout of new networking infrastructure.

However, things are now looking up for Ciena. The company's latest quarterly results (released on Sept. 2) and guidance indicate that the business environment has improved, and it may not be long before the stock regains its former glory. Let's look closely at Ciena's performance last quarter and see why it would be a good idea to buy the stock now.

Engineers inspecting a data center server.

Image source: Getty Images.

Ciena is about to step on the gas

Ciena surprised Wall Street with $988 million in revenue in the third quarter of fiscal 2021, which was an increase of 1.2% over the year-ago period. Analysts were expecting a year-over-year decline in the company's revenue to $969.6 million, but a "robust demand environment" led to a better-than-expected performance. Ciena's adjusted earnings of $0.92 per share surpassed the consensus estimate of $0.80 per share.

Ciena management struck an upbeat note on the earnings conference call, pointing out that there has been a substantial improvement in business conditions as service providers have started ramping up their spending. Ciena witnessed a nice jump in orders in Q3 that outpaced its actual revenue growth. Management believes that the strong order book and a higher backlog will allow it to deliver a stronger-than-usual performance in the second half of the year.

Not surprisingly, Ciena's guidance for the fiscal fourth quarter is quite impressive and marks a departure from the weak growth it has been reporting in recent quarters. The company anticipates $1 billion to $1.04 billion in revenue this quarter, which would be a 23% increase over the year-ago period's revenue of $828.5 million at the midpoint of the guidance range. Ciena also points out that its revenue for the second half of fiscal 2021 is on track to increase 26% over the first half.

More importantly, Ciena can maintain such impressive momentum over the long run thanks to secular tailwinds.

The strong demand environment is here to stay

Ciena operates in the optical transport networking space that's on track to benefit from the deployment of faster networks across the globe. The company is already witnessing a ramp-up in demand for its WaveLogic modems. Ciena added 11 new WaveLogic 5 Extreme customers last quarter and pointed out that it has shipped close to 20,000 coherent modems so far.

It is worth noting that Ciena took a year to ship the first 10,000 coherent modems, as the company had pointed out in May this year. The next 10,000 have arrived in a very short time as the latest management commentary indicates. Ciena investors can expect this impressive sales momentum to continue as the optical transport market is expected to clock a compound annual growth rate of over 15% through 2026, according to Mordor Intelligence, hitting $56 billion in revenue at the end of the forecast period.

Additionally, Ciena expects a sharp spike in the deployments of next-generation metro and edge networks that have become necessary to tackle the surge in data bandwidth and traffic in the wake of the pandemic as they bring the storage and computation of data closer to the end user. Ciena estimates that its total addressable market in the next-generation metro and edge space could jump to $22 billion in the future from around $13 billion currently.

The lucrative end-market opportunities bode well for Ciena's future, with analysts expecting the company's top and bottom lines to pick up the pace.

Period Revenue estimates Earnings estimates
Current fiscal year (2021) $3.60 billion $2.93 per share
Next fiscal year (2022) $3.91 billion $3.17 per share
Two fiscal years ahead (2023) $4.14 billion $3.53 per share

Data source: YCharts

That's why investors looking to buy a tech stock trading at an attractive valuation should keep an eye on Ciena. The stock is trading at just 19 times trailing earnings and a price-to-sales ratio of 2.6, both of which are lower than the S&P 500's trailing earnings multiple of 31.2 and the sales multiple of 3.25. As the company looks capable of keeping up its impressive growth rate thanks to the tailwinds discussed above, buying Ciena right now looks like a no-brainer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.