IT Hardware

Juniper Networks Inc Valuation – March 2018 $JNPR

Company Profile (obtained from Marketwatch): Juniper Networks, Inc. engages in the design, development, and sale of products and services for high-performance networks. Its products address network requirements for global service provides, cloud providers, national governments, research and public sector organizations, and other enterprises. The company was founded by Pradeep S. Sindhu on February 6, 1996 and is headquartered in Sunnyvale, CA.

JNPR Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of JNPR – March 2018

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 $9,823,121,353 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.41 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 77.78% Pass
6. Moderate PEmg Ratio PEmg < 20 22.09 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.11 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 2.41 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.87 Pass
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

EPSmg $1.19
MG Growth Estimate 15.00%
MG Value $45.66
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $17.20
MG Value based on 0% Growth $10.08
Market Implied Growth Rate 6.80%
Current Price $26.20
% of Intrinsic Value 57.38%

Juniper Networks, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the lack of earnings stability over the last five years. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.24 in 2014 to an estimated $1.19 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.8% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Juniper Networks, Inc. revealed the company was trading above its Graham Number of $20.86. The company pays a dividend of $0.4 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 22.09, which was below the industry average of 48.19, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-2.57.

Juniper Networks, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$2.57
Graham Number $20.86
PEmg 22.09
Current Ratio 2.41
PB Ratio 2.11
Current Dividend $0.40
Dividend Yield 1.53%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $4,184,500,000
Total Current Liabilities $1,738,200,000
Long-Term Debt $2,136,300,000
Total Assets $9,833,800,000
Intangible Assets $3,224,300,000
Total Liabilities $5,152,900,000
Shares Outstanding (Diluted Average) 377,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.51
Dec2017 $0.80
Dec2016 $1.53
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 $0.58
Dec2004 $0.24
Dec2003 $0.07
Dec2002 -$0.34
Dec2001 -$0.04
Dec2000 $0.43
Dec1999 -$0.05
Dec1998 -$0.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.19
Dec2017 $0.95
Dec2016 $0.93
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 -$0.11
Dec2006 -$0.40
Dec2005 $0.22
Dec2004 $0.05
Dec2003 -$0.02
Dec2002 -$0.07

Recommended Reading:

Other ModernGraham posts about the company

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

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Disclaimer:

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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