Nokia Corporation (NOK) and Juniper Networks, Inc. (JNPR) are two prominent players in the networking industry. Headquartered in Espoo, Finland, NOK provides mobile and fixed network solutions worldwide. It operates through three segments: ultra-broadband networks; IP networks and applications; and Nokia Technologies. JNPR designs, develops, and sells networking products and services worldwide. Its offerings include routing products, MX series ethernet routers and PTX series packet transport routers.
Thanks to consistent advancements in technologies such as 5G, internet of things (IoT) and artificial intelligence (AI), among others, the demand for networking solutions is expected to continue increasing in the coming months. The data center networking industry is expected to grow at an approximate 15% CAGR between 2021 – 2027, according to a report by Global Market Insights. As such, NOK and JNPR could continue witnessing increasing demand for their solutions.
But, while NOK has gained 25.8% over the past year, JNPR has returned 12.7%. Also, in terms of six months’ performance, NOK is a clear winner with 38.2% returns versus JNPR’s 26.5%. But which of these two stocks is a better pick now? Let’s find out.
NOK announced on June 3 that CG NET will deploy its Gigabit Passive Optical Networking (GPON) solution as part of an extensive Fiber-to-the-Home (FTTH) roll-out across the Kathmandu Valley. With fiber broadband being deployed in almost every country, NOK should continue to benefit from increasing demand for its products and services in the near- to midterm.
JNPR and NEC corporation announced on June 7, 2021, that they have been working with Herotel—South Africa’s largest fixed wireless service provider—to enable the country’s first commercial deployment of segment routing as a part of a significant network upgrade initiative.
Recent Financial Results
NOK’s revenue for the first quarter ended March 31, 2021, came in at EUR 5.08 billion ($6.18 billion), up 3.3% from the prior-year quarter. Its gross profit increased 10.9% year-over-year to EUR 1.93 billion ($2.35 billion). The company’s profit for the period was EUR 263 million ($320.19 million) compared to a EUR 115 million ($140 million) loss in the year-ago period. Its EPS for the quarter was EUR 0.05 ($0.04) compared to EUR 0.02 ($0.03) loss per share in the prior-year period.
For the first quarter, ended March 31, 2021, JNPR’s net revenues were $1.07 billion, which represents a 7.7% increase from the prior-year quarter. The company’s net loss for the quarter came in at $31.10 million compared to $20.40 million in net income in the prior-year quarter. Its non-GAAP EPS declined 45.5% sequentially to $0.30.
Expected Financial Performance
NOK’s annual revenue is expected to increase 4.6% in 2021 and 1.2% in its fiscal 2022. The company’s EPS is expected to increase 6.9% in its fiscal 2022. And its EPS is expected to grow at a 16.5% rate per annum over the next five years.
In comparison, analysts expect JNPR’s annual revenue to increase 4.6% in 2021 and 3.4% in its fiscal year 2022. Its EPS is expected to increase 10.5% in its fiscal 2022. Also, JNPR’s EPS is expected to grow at a 7.8% rate per annum over the next five years.
NOK’s $25.81 billion trailing-12-month revenue is 5.71 times JNPR’s $4.52 billion. However, JNPR is more profitable with a 57.72% gross profit margin versus NOK’s 39.69%.
But NOK’s ROTC and ROA of 6.34% and 3.47%, respectively, compare favorably with JNPR’s 4.43% and 3.21%.
In terms of forward EV/S, JNPR is currently trading at 2.08x, 98.1% higher than NOK’s 1.05x. In terms of forward EV/EBITDA also, JNPR’s 10.16x is 23.5% higher than NOK’s 8.23x.
So, NOK is the more affordable stock.
Both JNPR and NOK have an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
NOK has a B grade for Value, consistent with its 1.05x forward EV/S, which is 75.2% lower than the 4.24x industry average. JNPR also has a B grade for Value. This is justified given its 2.08x forward EV/S, which is 50.9% lower than the 4.24x industry average.
However, NOK has an A grade for Sentiment, in sync with favorable analyst sentiment, while JNPR has a grade of D for Sentiment.
Of the 55 stocks in the B-rated Technology-Communication/Networking industry, NOK is ranked #11 and JNPR is ranked #15.
In addition to the POWR Ratings grades we’ve just highlighted, we’ve rated both NOK and JNPR for Momentum, Stability, Growth and Quality. Click here to see the additional ratings for NOK. Also, get all JNPR’s ratings here.
Both NOK and JNPR are well-positioned to benefit from the increasing demand for networking solutions. However, NOK seems to be the better buy here based on its lower valuation and better financials.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about top-rated stocks in the Technology-Communication/Networking industry.
NOK shares were trading at $5.58 per share on Tuesday afternoon, down $0.03 (-0.53%). Year-to-date, NOK has gained 42.71%, versus a 13.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More…
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