NEW YORK (TheStreet) -- With the better-than-expected result released from rival Avago Technologies (AVGO), it would seem demand for optical networking components is back on the rise. And this should put shares of Finisar (FNSR) back on the radar of investors looking to capitalize on that growth.
And although Finisar stock seems expensive today at 68 times earnings, the Sunnyvale, CA.-based company, which reports fiscal fourth-quarter earnings Friday, can still reward investors willing to be patient for the next 12 to 18 months.
Finisar stock -- despite being up more than 15% in 2015 -- has a mean analyst rating of "buy," and an average analyst 12-month price target of $24. That means analysts expect 7% gains from current levels of around $22. Assuming Finisar can reach its high analyst target of $27, the stock could gain 20%.
While the its trailing P/E of 70 implies above-average risk, its P/E drops to 17 based on fiscal 2016 mean earnings estimates of $1.26 a share. And if Finisar does meet its 2016 estimate, it would have grown earnings by 20% year over year.
Finisar's projected five-year annual growth rate is 23.81%, meaning that analysts expect Finisar's earnings to increase over the next several years -- which could also mean a rising stock price over the long term.
Finisar makes optical networking components that are used in both wired networks and wireless networks for large telecom carriers like AT&T (T). And Finisar's products have been instrumental in AT&T's buildout of its high-speed 4G LTE network (Long-Term Evolution).