Optical network supplier Ciena Corporation (NYSE: CIEN) is worth adding to the watch list. Last week, on June 1, the company reported revenue and profits that beat consensus estimates. The results run contrary to expectations that a slowdown in China would hurt companies in this sector.
Ciena earned $0.45 per share on revenue of $707 million. The company’s wide range of offerings now covers three areas: software, components, and systems. The combined result is operating margin at 12.5% and strong shipment volume and orders during the second fiscal quarter. CIEN generated $72 million in cash from operations. It ended Q2 with nearly $1 billion in cash and investments.
Looking ahead, CIEN expects revenue of between $710 million - $740 million. Gross margin will be in the mid 40’s. For the full year, revenue will grow to around 8 – 9 percent.
Related stocks
Investors interested in exposure to this sector should look at Oclaro (NASDAQ: OCLR). At a forward P/E of 13x, the stock also bounced back in the last month. Acacia Communications (NASDAQ: ACIA) trades at a 15.5x forward P/E but more orders from China would lift revenue.
Takeaway
Ciena has a 13x forward P/E and low debt/equity (of 1.1 times). The stock may pull back but if it does not, it is still a compelling growth stock.
