Margins matter. The more Juniper Networks
Here's the current margin snapshot for Juniper Networks over the trailing 12 months: Gross margin is 64.6%, while operating margin is 14.8% and net margin is 9.6%.
Unfortunately, a look at the most recent numbers doesn't tell us much about where Juniper Networks has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.
Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.
Here's the margin picture for Juniper Networks over the past few years.
Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.
Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.
Here's how the stats break down:
- Over the past five years, gross margin peaked at 68.2% and averaged 66.6%. Operating margin peaked at 19.8% and averaged 16.7%. Net margin peaked at 15.1% and averaged 11.0%.
- TTM gross margin is 64.6%, 200 basis points worse than the five-year average. TTM operating margin is 14.8%, 190 basis points worse than the five-year average. TTM net margin is 9.6%, 140 basis points worse than the five-year average.
With recent TTM operating margins below historical averages, Juniper Networks has some work to do.
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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. 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.