JDS Uniphase (JDSU) is the former tech darling after it reached amazing heights in 2000. However, since then times have been tough and although there have been periods of outperformance, it is still lower than where it landed after the tech bust in 2002, suggesting not much value creation. The valuation now isn't very attractive and the outlook for the company is mixed.
In its last quarterly release, management said that:
we are pleased with the improving demand for our products, as evidenced by a book to bill of greater than one in each of our business segments, although we expect macro-economic conditions to cause margin pressure in the near-term.
Until the company is able to show some consistent value creation or the fundamentals change significantly in optical networking significantly, it is better to look elsewhere in the tech sector. Below is a closer look at the valuation metrics and earnings history.
Valuation: JDS Uniphase's trailing 5 year valuation metrics suggest that the stock is overvalued as the metrics are above their respective 5 year averages. JDS Uniphase's current P/B ratio is 2.9 and it has averaged 2.1 over the past 5 years with a high of 4.5 and low of 0.8. JDS Uniphase's current P/S ratio is 1.7 and it has averaged 1.7 over the past 5 years with a high of 2.7 and low of 0.5.
Price Target: The consensus price target for the analysts who follow JDS Uniphase is $17. That is upside of 23% from today's stock price of $13.91 and suggests that the stock is fairly valued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: JDS Uniphase is currently trading at about $14 a share with analysts expecting EPS of $0.95 next year, an earnings increase of 51% y/y, for a forward P/E ratio of 14.6. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Avago Technologies (NASDAQ:AVGO) is currently trading at about $38 a share with analysts expecting EPS of $2.88 next year, an earnings increase of 12% y/y, for a forward P/E ratio of 13.1.
Finisar (NASDAQ:FNSR) is currently trading at about $19 a share with analysts expecting EPS of $1.21 next year, an earnings increase of 39% y/y, for a forward P/E ratio of 15.9. The mean forward P/E of JDS Uniphase's competitors is 14.5 which suggests that JDS Uniphase is fairly valued relative to its publicly traded competitors.
Earnings Estimates: JDS Uniphase has beat EPS estimates 3 times in the past 4 quarters. The company's EPS figures have come in between 0 cents and 5 cents from consensus estimates or about 0% to 50% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.
Price Action: JDS Uniphase is down 37.2% over the past year, underperforming the S&P 500, which is up 10%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $12.97 and above its 200 day moving average, which sits at $12.76.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.