We think that ViaSat Inc. currently is a better pick compared to Juniper Networks Inc.. While, Juniper is a networking products and services company, ViaSat is a broadband services and secure networking systems provider. JNPR stock currently trades at 2.4x trailing revenues, almost double that of ViaSat, whose P/S multiple stands at around 1.3x. Does this gap in the companies’ valuations make sense? We don’t think it does, and we expect ViaSat to close this gap. While both companies have seen a decent recovery in revenues since the lockdowns started being lifted, VSAT has seen much more consistent growth over the past four fiscal years than Juniper. Juniper’s revenues have, in fact, dropped from $5 billion in FY ’17 to $4.4 billion in FY ’20 and currently stand at $4.7 billion on an LTM basis. In comparison, ViaSat’s sales have risen from $1.6 billion in FY ’17 to $2.3 billion in FY ’21 (ViaSat’s fiscal year ends in March), and currently stand at $2.5 billion on an LTM basis.
Having said that, we dive deeper into the comparison, which makes ViaSat a better bet than Juniper Networks, especially at these valuations. Let’s step back to look at the fuller picture of the relative valuation of the two companies by looking at detailed historical revenue growth as well as operating income and operating margin growth, along with the financial position. Our dashboard Juniper Networks Inc. vs ViaSat: Industry Peers, But ViaSat Is A Better Bet has more details on this. Parts of the analysis are summarized below.
1. ViaSat Ahead On Revenue Growth
Both companies managed to see sales grow during the pandemic, but ViaSat has witnessed faster and more consistent revenue growth over the years. ViaSat’s sales have jumped from $1.6 billion in FY ’17 to $2.5 billion on an LTM basis, while JNPR’s revenues have pulled back from $5 billion in FY ’17 to $4.7 billion on an LTM basis.
Additionally, ViaSat’s pre-Covid annual sales growth stands at 14.8%, much higher than JNPR’s -3.7%, whereas growth during Covid, too, stands at 11.7%, better than JNPR which saw no growth during Covid. A look at recent trends reveals that ViaSat witnessed 26.5% YoY sales growth for its most recent quarter (Q2 ’22), 6x more than Juniper’s 4.4%.
Finally, LTM and last three FY sales growth for ViaSat stands at 12% and 13% respectively, much more than Juniper’s 5.1% and -4%.
2. EBIT margins and Cash Position: A Mixed Bag
ViaSat’s P/EBIT ratio stands at around 44.4x currently, lower than Juniper’s 51x. This makes sense as Juniper’s LTM EBIT margins stand at 4.6%, higher than ViaSat’s 3%. However, in terms of margin growth, ViaSat is ahead, with LTM vs last three FY margin change at 2.5%, more than Juniper’s -4.9%.
Looking at both companies’ cash position, too, Juniper’s debt as a % of equity stands higher at 15.1%, vs ViaSat’s 0.8%. However, Juniper’s cash as a % of assets also stands higher at 15.3%, much more than ViaSat’s 3.6%.
3. Finally, ViaSat Is Ahead In Terms Of Expected Returns
Using P/S as a base, due to high fluctuations in P/E and P/EBIT, we believe ViaSat is the better choice. ViaSat’s LTM revenues of $2.5 billion are expected to rise at a CAGR of 10.9% as per our estimates, taking revenue numbers three years out to as high as $3.5 billion. Assuming ViaSat’s P/S ratio to actually rise marginally to around 1.5x, this means that the market cap would rise to $5 billion, an upside of 34% over three years.
In comparison, given historical trends, we expect Juniper’s sales to rise slower at a CAGR of 1.6%, taking revenue in three years to $4.9 billion. Considering the P/S for Juniper to pull back marginally to 2.1x, we estimate a market cap of $10 billion for JNPR, slightly lower than the level it is at today.
The Net of It All
Despite Juniper’s revenues being larger than that of ViaSat’s, the latter has seen faster and more consistent revenue growth over the years, combined with faster EBIT margin growth and lower debt. Additionally, our comparison of the post-Covid recovery above, shows that ViaSat has seen a much stronger growth than JNPR. Due to this, we believe that ViaSat deserves a higher P/E and P/EBIT multiple compared to Juniper Networks, and we believe that this will reflect in the future in the companies’ valuations. As such, we believe that ViaSat stock is currently a better bet compared to Juniper Networks stock.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.
Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates