Why Finisar Has Potentially More Room to Run
We all know about the importance of networking speed and bandwidth in this content-rich climate where it is all about how fast and efficient data moves through networks. Finisar Corporation (NASDAQ:FNSR) has been one of the best-performing networking technology stocks over the past year, up 190% during this span.
Finisar Corporation has been around for nearly three decades. FNSR stock was around during the crazy days of late 1999 and the early 2000s, when networking technologies were emerging and the Internet was becoming a household must.
The company develops advanced fiber optic subsystems and components used to power the movement of voice, video, and data communications. In the years since, the demand for faster bandwidth makes companies like Finisar Corporation extremely relevant.
The FNSR stock chart shows the impressive moves. There have been several breakouts over the past year. FNSR stock is at a five-year high after breaking out from $30.00.
Chart courtesy of StockCharts.com
Yet, despite all of this traders’ hoopla, Finisar stock continues to trade at well below the levels seen in the early 2000s, when networking technologies were attracting massive buying momentum, akin to what we have seen with the supercharged social media space.
The chart shows the multiple breakouts for FNSR stock, including bullish upside trading gaps and a golden cross. Finisar stock could see some exhaustion.
My Bull Case for FNSR Stock
Finisar Corporation has been a story of consistency. Revenues have increased in each fiscal year (ending in May) from FY04 to FY12, prior to a decline in FY13 before rallying in FY14 to FY16. This consistency is impressive, and is predicted to continue at 15.70% and 11.30% to $1.46 billion and $1.63 billion, respectively for FY17 and FY18. (Source: “Finisar Corporation (FNSR),” Yahoo! Finance, last accessed December 9, 2016.)
The earnings picture hasn’t been as bright, but Finisar Corporation has produced higher profits in two straight years. Fiscal earnings are expected to continue in FY17 and FY18. Finisar Corporation has outperformed, with an average earnings per share (EPS) beat of around 16% over the last four quarters.
The underlying fundamentals support a higher stock price for FNSR stock as long as the company continues to deliver what Wall Street wants to hear.
Finisar stock is expected to grow its earnings by an average of 17.50% annually over the next five years versus a five-year compound annual growth rate (CAGR) of 9.92% over the past five years.
FNSR stock trades at a reasonable 16.45 times its FY18 EPS and a price/earnings to growth (PEG) ratio of 1.03, which is pretty attractive for the growth stock, especially after discounting in the net cash.
While there are no absolutes as far as the direction of FNSR stock, the chart appears to support potentially more upside moves over the next few years.