Juniper Networks Inc Valuation – June 2016 $JNPR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Juniper Networks Inc (JNPR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Juniper Networks, Inc. designs, develops and sells products and services for high-performance networks to enable customers to build networks for their businesses. The Company sells its products in over 100 countries in three geographic regions: Americas; Europe, Middle East, and Africa (EMEA), and Asia Pacific (APAC). It sells its high-performance network products and service offerings across routing, switching and security. Its products address network requirements for global service providers, cloud environments, enterprises, governments and research and public sector organizations. In addition to its products, the Company offers its customers across the world services, including technical support, professional services, education and training programs. Its Junos Platform enables its customers to expand network software into the application space, deploy software clients to control delivery. The Junos Platform includes a range of products, such as Junos OS, Junos Space and Contrail.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of JNPR – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,926,736,985 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.16 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 53.11% Pass
6. Moderate PEmg Ratio PEmg < 20 22.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.95 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.16 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.21 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

JNPR value chart June 2016

EPSmg $1.03
MG Growth Estimate 8.88%
MG Value $27.12
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $14.97
MG Value based on 0% Growth $8.78
Market Implied Growth Rate 6.99%
Current Price $23.22
% of Intrinsic Value 85.63%

Juniper Networks, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.65 in 2012 to an estimated $1.03 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.99% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Juniper Networks, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

JNPR charts June 2016

Net Current Asset Value (NCAV) -$2.58
Graham Number $22.36
PEmg 22.49
Current Ratio 2.16
PB Ratio 1.95
Current Dividend $0.40
Dividend Yield 1.72%
Number of Consecutive Years of Dividend Growth 3


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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $3,274,200,000
Total Current Liabilities $1,515,300,000
Long-Term Debt $2,131,800,000
Total Assets $8,917,700,000
Intangible Assets $3,018,600,000
Total Liabilities $4,279,600,000
Shares Outstanding (Diluted Average) 389,300,000

Earnings Per Share History

Next Fiscal Year Estimate $1.85
Dec2015 $1.59
Dec2014 -$0.73
Dec2013 $0.86
Dec2012 $0.35
Dec2011 $0.79
Dec2010 $1.15
Dec2009 $0.22
Dec2008 $0.93
Dec2007 $0.62
Dec2006 -$1.76
Dec2005 $0.59
Dec2004 $0.25
Dec2003 $0.10
Dec2002 -$0.34
Dec2001 -$0.04
Dec2000 $0.43
Dec1999 -$0.05
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.03
Dec2015 $0.61
Dec2014 $0.24
Dec2013 $0.71
Dec2012 $0.65
Dec2011 $0.78
Dec2010 $0.59
Dec2009 $0.25
Dec2008 $0.22
Dec2007 -$0.10
Dec2006 -$0.39
Dec2005 $0.24
Dec2004 $0.07
Dec2003 -$0.01
Dec2002 -$0.05
Dec2001 $0.07
Dec2000 $0.10

Recommended Reading:

Other ModernGraham posts about the company

34 Companies in the Spotlight This Week – 2/7/15
Juniper Networks Inc. Annual Valuation – 2015 $JNPR
18 Companies in the Spotlight This Week – 10/25/14
Juniper Networks Quarterly Stock Valuation – October 2014 $JNPR
10 Companies in the Spotlight This Week – 7/12/14

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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