Everyone is selling, the charts are red, but should you panic? Not at all. As a long term investor, my favorite time of the economic cycle is when great stocks sell at an unjustified discount. Today I want to bring to light the market’s darling – Juniper Networks, Inc.. Looking at its size, financial health and track record, I believe there’s an opportunity with Juniper Networks during these volatile times.
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Juniper Networks, Inc. designs, develops, and sells network products and services worldwide. Formed in 1996, and led by CEO Rami Rahim, the company now has 9.28k employees and with the market cap of US$8.7b, it falls under the mid-cap group. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.
Currently Juniper Networks has US$2.0b on its balance sheet, which requires regular interest payments. This requires the business to have enough cash to meet these upcoming interest expenses. Juniper Networks generates enough earnings to cover its interest payments, more specifically, its interest coverage ratio (EBIT/interest) is 29.27x, which is well-above the minimum requirement of 3x. Moreover, its cash flows from operations copiously covers it debt by 37%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means JNPR is financially robust in the face of a volatile market.
JNPR’s annual earnings growth rate has been positive over the last five years, with an average rate of 14%, overtaking the market growth rate of 13%. It has also returned an ROE of 12% recently, above the industry return of 7.9%. Characteristics I value in a long term investment are proven in Juniper Networks, and I can continue to sleep easy at night with the stock as part of my portfolio.
Next Steps:Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Juniper Networks tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
- Future Outlook: What are well-informed industry analysts predicting for JNPR’s future growth? Take a look at our free research report of analyst consensus for JNPR’s outlook.
- Valuation: What is JNPR worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether JNPR is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.