Buy, Sell, or Hold: Infinera Corp. (INFN)

Infinera also sports little to no debt, which is a plus. It has about $200 million in cash, enough to last it a few years at its recent free cash flow burn rate .

Sell
A look at Infinera’s financial statements offers some unexciting numbers. Revenue has been up and down in recent years, and both operating and net income are negative — and have been for several years.

Infinera faces competition, too, such as from Alcatel Lucent SA (ADR) (NYSE:ALU) , which isn’t exactly in the healthiest condition, saddled with debt, heavily shorted, and aiming to cut costs. A $2.2 billion cash infusion from lenders has some hopeful, however.

Infinera’s valuation numbers aren’t too exciting. Its P/E ratios are negative, as its earnings are in the red. Its price-to-sales ratio of about 1.8 is above the S&P 500’s 1.4 and a bit above the industry’s 1.7. The picture can look very different once its bottom line turns from red to black, but this is where Infinera is now.

Hold (off)
Given the reasons to buy or sell Infinera, it’s not unreasonable to decide to just hold off on it. You might, for example, want to wait for the company’s losses to turn into gains, perhaps for a string of quarters.

You might also check out some other interesting telecommunication companies, to see if they seem like better bargains than Infinera. Perhaps take a look at industry giant Cisco Systems, Inc. (NASDAQ:CSCO) , which has been broadening its scope and even has a dividend yield near 2.6%. It’s potentially threatened by software-defined networks (SDNs), which reduce the need for hardware. It might also buy its way into that market, though, as Juniper has done.

The verdict
I actually own a few shares of Infinera, and am in the red on them. That shouldn’t influence your decision, however, as everyone’s investment calculations are different, and what matters most is how we expect the company to perform from here. Do your own digging and see what you think. The company may perform spectacularly in the coming years, but remember that there are plenty of compelling stocks out there.

The article Buy, Sell, or Hold: Infinera originally appeared on Fool.com and is written by Selena Maranjian.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Infinera. The Motley Fool recommends and owns shares of Infinera. It also recommends Cisco Systems.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.