Ciena Corporation (CIEN), Cisco Systems, Inc. (CSCO): A Better Networking Investment Than the Big Boys?

Cisco, the world’s largest manufacturer of computer networking products, just recently had a great quarter and their shares have spiked a bit since. Cisco Systems, Inc. (NASDAQ:CSCO) dominates the Ethernet switching and router markets, and does its business all around the world, and aims to get their customers ready for the next generation, 100-gigabit technology. Shares are not quite as cheap as they were before this past week’s report, but still trade at a pretty cheap 13.5 times earnings, which sounds even better considering the company’s $32 million in net cash (cash minus debt) and 2.8% dividend yield, which is sure to attract some income investors.

Juniper Networks, Inc. (NYSE:JNPR) is much smaller than Cisco Systems, Inc. (NASDAQ:CSCO), but still several times larger than Ciena. Juniper produces IP networking solutions, with a focus on routers for service providers. Like Ciena, Juniper’s revenue is expected to grow at a fast pace over the next few years (around 15%), and the stock trades at a pretty fair valuation of 20.3 times earnings. Using a similar argument as above, Juniper trading for 12.3 times 2015’s projected earnings makes it seem like a pretty attractive investment.

Buy, Sell, or Hold?

Despite being the smallest company mentioned, I like Ciena Corporation (NASDAQ:CIEN)’s odds here. With its shaky track record of profitability, it trades at a very steep discount relative to its potential. The rapid increase in network bandwidth consumption that is expected over the next several years should keep all three of these companies busy for years to come. None of these are a bad idea as an investment, and Cisco Systems, Inc. (NASDAQ:CSCO) is definitely the most stable and safe of the bunch. But on a risk/reward basis, a smaller up-and-coming player like Ciena could pay off huge in the long run.

The article A Better Networking Investment Than the Big Boys? originally appeared on Fool.com and is written by Matthew Frankel.

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