Ciena (CIEN): A Buy After Earnings

Cisco Systems, Inc. (NASDAQ:CSCO) is more of a value play than a growth play, but has a global reach. Even being a giant in the communications industry at a $100+ billion market-cap, Cisco still has higher expected growth than some of the other smaller, more nimble tech stocks. The legendary Jim Simons took a large new position in Cisco in 3Q (check out Simons’ newest picks).

Adtran, Inc. (NASDAQ:ADTN) is a maker of communication network solutions and is down 35% year to date following two quarterly EPS misses, including a 3Q miss of 20%. The communication company appears to be far from a value play with a forward P/E at 26x, compared to a 16x trailing P/E. Its 10% long-term growth rate puts its PEG at 2.5. Adtran had notable billionaires fleeing from the stock in the third quarter, with Israel Englander, Ken Griffin and D.E. Shaw all selling their entire positions (check out D.E. Shaw’s newest picks).

From a valuation standpoint we consider Cisco a best-in-industry opportunity, but would still opt for Ciena’s growth. Cisco’s dividend is relatively new, starting dividend payments in 2011, and already yields 2.8%. This is slightly below Ericsson’s 3.6% yield, but Cisco’s payout is only 23% of its earnings compared to Ericsson’s 55% payout ratio. Cisco trades at the bottom of the five companies listed here, on a forward P/E basis at 9x earnings. At 32x earnings, Ciena is the most expensive, and Ericsson (14x), Juniper (17x) and Adtran (26x) are all at a premium to Cisco. What helps investors overlook Ciena’s high-end P/E is its 3-year expected earnings growth rate of 190% annually. One of Ciena’s peers is also on our list of top ten tech stocks loved by hedge funds (see which one).