I'm not at all suggesting that anyone should jump into this stock and pretend that there are no risks. One example of drawbacks to the company's growth is that it's strongly predicated on carriers choosing to not starve themselves and instead to upgrade their networking equipment.

Even so, what I do believe is that we now have more than enough data on Ciena to appreciate that the worst is over. In that process, I've become a believer in the company's management.

As skeptical as I am at times, having faith in management is not something that comes easily for me. However, that Ciena's management continues to fight off pricing pressure and grow margin amid a tough spending climate is impressive.

I've said it before and I'll say it again, the fact that Ciena has remained independent for this long is surprising. Given the company's ability to leverage its technological advantages to grow, while showing a willingness to innovate and yet be profitable, makes Ciena an attractive acquisition candidate.

The stock is getting more expensive each quarter, but I'm still not willing to rule out this possibility, especially given that Oracle ( ORCL) was willing to put up $2.1 billion to pick-off Acme Packet ( APKT).

An acquisition may not happen when we expect, but I believe this strong quarter now places Ciena in the spotlight where it belongs, especially given the company's strong margin performance. What this tells me is that management has shifted its focus towards returning value to shareholders. And given the resurgence in carrier spending, there is no reason to expect that this level of performance will end any time soon.

With shares of Ciena trading at around $24, on the basis of continued free cash flow and revenue growth there's strong support for the stock to reach $30. This suggests that the stock remains undervalued by at least 25%.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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