Juniper Networks, Inc. (JNPR) in Sunnyvale, Calif., designs, develops, and sells network products and services worldwide. The company offers ACX series universal access routers, MX series Ethernet routers, PTX series packet transport routers, wide-area network SDN controllers, and session smart routers. In comparison, Arista Networks, Inc. (ANET) in Santa Clara, Calif., develops, markets, and sells cloud networking solutions. The company's cloud networking solutions consist of extensible operating systems, a set of network applications, and gigabit Ethernet switching and routing platforms.
Networking solutions are in high demand because vast amounts of data are being uploaded to the cloud due in-part to the increasing adoption of hybrid working trends. The trend is expected to continue owing to the resurgence of COVID-19 cases and the rising penetration of the internet of things (IoT) worldwide. Furthermore, the growing need for businesses to go digital to remain competitive is expected to increase the demand for agile networks, driving the network industry's growth. According to a report by Markets and Markets, the global network-as-a-service (NaaS) market is expected to grow at a 9.4% CAGR through 2026. Therefore, both JNPR and ANET should benefit.
ANET stock has gained 6.1% in price over the past month, while JNPR has returned 3.8%. Also, ANET’s 34.7% gains over the past six months are significantly higher than JNPR’s 20.2% returns. Furthermore, ANET is the clear winner with 61.2% gains versus JNPR’s 35.4% returns in terms of the past year’s performance.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On Feb. 14, 2022, JNPR acquired WiteSand, a cloud-native zero trust Network Access Control solutions pioneer. The deal brings a highly experienced engineering team and exceptional technology to the company, accelerating its efforts to deliver a next-generation NAC solution as a critical element of its award-winning AI-driven enterprise portfolio.
On March 29, 2022, ANET announced the next phase of its cognitive campus vision with its introduction of the Cognitive Unified Edge (CUE). CUE enables commercial customers to accelerate new services and technology innovations by consolidating multiple security and networking functions into an "edge as a service" cloud-managed solution. This could lead to increasing demand for its solutions.
Recent Financial Results
JNPR’s net revenue increased 6% year-over-year to $1.30 billion for its fiscal fourth quarter, ended Dec. 31, 2021. The company’s non-GAAP net income grew 14% year-over-year to $184.70 million. Also, its non-GAAP EPS came in at $0.56, up 1.8% year-over-year.
ANET’s revenues increased 43.8% year-over-year to $824.50 million for its fiscal fourth quarter, ended Dec. 31, 2021. The company’s non-GAAP net income grew 32.7% year-over-year to $262.40 million. Also, its non-GAAP EPS came in at $0.82, up 32.3% year-over-year.
Past and Expected Financial Performance
JNPR’s revenue and levered FCF have grown at CAGRs of 0.6% and 4%, respectively, over the past three years. Analysts expect JNPR’s revenue to increase 7.8% in its fiscal 2022 and 4.5% in fiscal 2023. The company’s EPS is expected to grow 13.8% in fiscal 2022 and 14.6% in fiscal 2023. And its EPS is expected to grow at a 9.4% rate per annum over the next five years.
In comparison, ANET’s revenue and levered FCF have grown at CAGRs of 11.1% and 4.7%, respectively, over the past three years. The company’s revenue is expected to increase 30.5% in its fiscal year 2022 and 14.7% in fiscal 2023. Its EPS is expected to grow 26.5% in fiscal 2022 and 15.2% in fiscal 2023. Also, ANET’s EPS is expected to grow at a 17.7% rate per annum over the next five years.
Profitability
JNPR’s trailing-12-month revenue is 1.61 times ANET’s. However, ANET is more profitable, with gross profit and net income margins of 63.80% and 28.52%, respectively, compared to JNPR’s 57.86% and 5.34%.
Furthermore, ANET’s 23.04%, 11.04%, and 15.48% respective ROE, ROA, and ROTC are higher than JNPR’s 5.70%, 3.01%, and 4.21%.
Valuation
In terms of forward non-GAAP P/E, ANET is currently trading at 36.06x, which is 101.3% higher than JNPR’s 17.91x. Furthermore, ANET’s 24.47x forward EV/EBITDA ratio is 120.1% higher than JNPR’s 11.12x.
So, JNPR is relatively affordable here.
POWR Ratings
JNPR has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. In contrast, ANET has an overall C rating, which translates to Neutral. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
JNPR has a B grade for Growth, while ANET has a C grade for Growth.
Among the 54 stocks in the Technology - Communication/Networking industry, JNPR is ranked #7. In comparison, ANET is ranked #16.
Beyond what I have stated above, we have also rated the stocks for Value, Quality, Momentum, Stability, and Sentiment. Click here to view all the JNPR ratings. Also, get all the ANET ratings here.
The Winner
The networking solutions market is expected to grow exponentially with rapid digital transformation. While both JNPR and ANET are expected to gain, we think it is better to bet on JNPR now because of its lower valuation.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Technology - Communication/Networking industry here.
JNPR shares were trading at $34.59 per share on Tuesday afternoon, up $0.18 (+0.52%). Year-to-date, JNPR has declined -2.54%, versus a -6.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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