However, 2016 saw sales drop, sending the stock plummeting 53%.
The company's management guided that 2018 would bring strong revenue growth for Infinera.
The optical sector is a hive of possibilities. Companies such as Lumentum Holdings (LITE) , Oclaro (OCLR) , Ciena (CIEN) and Applied Optoelectronics (AAOI) are pushing the envelope and propelling long-term capabilities.
With steadily rising demand for faster internet, the long-term outlook for equipment makers like Infinera is extremely positive. In fact, the company serves several major players, including Facebook (FB) , Level 3 Communications (LVLT) , Liberty Global (LBTYA) (LILA) , CenturyLink (CTL) , Vodafone (VOD) and T-Mobile (TMUS) .
After a sluggish 2016, Infinera should mount recovery led by telecom and networking giants ready for the next wave of infrastructure upgrades.
Analysts are expecting $804 million in sales for fiscal 2017, with a nearly 16.5% leap to $936.4 million in 2018. The revenue dip in 2016 and 2017 is largely the result of product transitions. Management at Infinera expects that when it introduces next-generation products, earnings should rise in 2017 and in 2018.
Further, the massive explosion of bandwidth-heavy applications and devices, should position Infinera as a premier equipment provider. And there's also the game-changing Internet-of-Things (IoT).
Like many optics equipment investment opportunities, profitability isn't a primary focus right now. However, the company has outlined a number of long-term goals, including achieving 50% gross margins and an operating margin of 15%, which currently sits at -3%. Sustainable profits should start to come in as Infinera's next-generation equipment achieve sufficient market share.
Additionally, the company must balance technology investments with disciplined expense management. Based on fiscal 2018 sales estimates, Infinera trades at a price-to-sales ratio (P/S) of 1.8 times. This is a discount to rival Oclaro's 3.06 P/S ratio.
While there could be customer level pricing challenges and emerging competition from China, Infinera, is well-positioned to capitalize on the infrastructure boom.
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