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Friday, August 11, 2006

Juniper By The Numbers:Is The Stock Cheap Now?

Stocks: (JNPR)

Juniper put out more bad news yesterday. It will have to restate earnings. It will have to increase expenses for options dating. It may get a delisting notice from Nasdaq.

But, hold on a minute. The company actually has a balance sheet and underlying business that makes the stock a bargain. There are certainly risks, but they may be more than offset by the numbers.

Juniper trades at $12.31. That is a 52-week low and its is down more than half from its 12-month high of $24.68.

Juniper's growth rate is the stuff of dreams. In 2003, revenue was $702 million. In 2004, $1.336 billion. In 2005, $2.064 billion. The company had positive operating income each year, ending with $446 million in 2005. In Q1 06, the company had revenue of $567 million and operating income of $91 million.

Juniper now has a market cap of $6.9 billion. The company has cash, short-term investments, and long-term investments of over $2 billion. The company also has a price to cash flow of below 12 versus the Morningstar industy average of 14.8. The company's EPS for the trailing twelve months is $.59.

Cash and investments plus earnings of about $500 million take the company's core market cap down to about $4.5 billion. For a growing company with $2 billion in sales and a hefty margin, that is a good price even in the face of the company's difficulties.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

P.S. Correction: Our analysis did not take into account $399 million of zero coupon debt due in 2008. This does not affect the Morningstar analysis. It does mean that the core market cap is about $4.9 billion. On this basis, we stand by our opinion that the stock is very inexpensive at $12.25.

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