Is There Now An Opportunity In Ciena Corporation (NYSE:CIEN)?

By
Simply Wall St
Published
May 01, 2022
NYSE:CIEN
Source: Shutterstock

While Ciena Corporation (NYSE:CIEN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$70.18 at one point, and dropping to the lows of US$53.70. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ciena's current trading price of US$55.17 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ciena’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Ciena

What is Ciena worth?

Good news, investors! Ciena is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.1x is currently well-below the industry average of 24.36x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Ciena’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Ciena look like?

earnings-and-revenue-growth
NYSE:CIEN Earnings and Revenue Growth May 1st 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Ciena, it is expected to deliver a relatively unexciting earnings growth of 1.0%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since CIEN is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CIEN for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CIEN. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Ciena and you'll want to know about this.

If you are no longer interested in Ciena, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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