Tech/BioTech / Industry

Top 5 Fiber Optic Stocks to Watch

  • Declan O’Flaherty

    Declan holds a Bachelor of Commerce from the University of Alberta and has over 4 years of experience investing in financial markets. As a fundamental investor, Declan embraces the investment principles of Warren Buffett and his disciples. This puts a focus on finding businesses with healthy financials, competent and accountable leader, enduring competitive advantages, and those that are selling at discount to what they are worth.

    View all posts

Fiber optic technology is transforming the way we communicate, work, and even entertain ourselves.

With the creation of the fifth-generation network (5G), and more advancements in the future, our communities are now in a position to transfer vast amounts of data at lightning-fast speeds, revolutionizing the way businesses and households operate.

As demand for communications networks continue to grow, it’s creating meaningful opportunities for investors and entrepreneurs to capitalize on this lucrative and important market.

To help facilitate this search, we’re providing you with five of our top fiber optic stocks available in the market, and explain a few of the key risks and rewards associated with these equities.

If you are a serious investor looking to make the most of this profitable industry, read below to discover why fiber optic stocks may be worth adding to your portfolio.

Why Invest in Fiber Optic Stocks?

Investing in fiber optics stocks can be advantageous for multiple reasons.

Here are a few of the main reasons why you should consider investing in fiber optic stocks:

Growing Demand

Fiber Optics Market Size, Precedence Research
Fiber Optics Market Size, Precedence Research

With society becoming more dependent on internet technologies, fiber optic companies are positioned to be key players in the world economy.

According to Precedence Research, the global fiber optics market is expected to be worth $11.1 billion by 2030, implying a compound annual growth rate of 4.6%.

Despite the seemingly small growth rate, it’s important to understand that our dependence on this technology is substantial and will affect our consumption of the internet in the future.

As such, some businesses in this industry will reap significant profits without having to exhaust a lot of capital making them high-functioning cash cows.

Furthermore, there may be even higher growth opportunities within certain niche markets, such as emerging markets where access to fiber optic networks is limited.

Want to know the truth about growth stocks like fiber optics? Check out this video.

Foundation for the Future and Long-term Growth Potential

As we transition into the knowledge era where social networks and artificial intelligence dominate our day-to-day existence, our reliance on the fiber optic network will become even more necessary.

Therefore, investing in a business that is laying the foundation for a digital environment is a savvy move given that these companies are expected to play a key role for many years to come.

Moreover, fiber optic technology companies are at the forefront of technological advancement, meaning that these businesses are a part of the select few developing the next cutting-edge products.

If you were to invest in one or two of the best fiber optic stocks now, you would likely find an excellent buying opportunity and capitalize on this foundational technology

Sustainable Competitive Advantage

There is a certain stickiness to fiber optic companies given that they must lay down the infrastructure for the network to operate.

With fiber optic cables lasting more than 40 years, it’s often the case that a business or municipality will stick with only a few businesses to manage their data traffic and transmission needs.

This essentially means that a company can run competition free for an extended period as long as they continue to satisfy consumers with higher bandwidths and faster speeds.

On top of that, if the business has relatively high economies of scale, it can strengthen its competitive advantage further given that it often produces and installs fiber optic cables for less.

Overall, fiber optic stocks have some of the most durable competitive advantages in the market today.

When analyzing each fiber optic stock, we will want to look at their profit margins and return on equity to reinforce that these competitive advantages hold—High-profit margins demonstrate pricing power and the ability to retain capital, while return on equity demonstrates a management team’s ability to deploy capital effectively.

To learn why these metrics are important to consider, check out this article.

Top 5 Fiber Optic Stocks to Watch

Clearfield (CLFD)

Market Cap: $396.96 Million

Revenue History for Clearfield,
Revenue History for Clearfield,

If you are looking for a smaller fiber optic company to invest in, then Clearfield is the perfect play.

As a manufacturer of fiber optic cable accessories, the company offers a variety of products that help connect these cables to buildings and other places.

For example, Clearfield makes things like panels, cabinets, wall boxes, and enclosures that hold and protect fiber optic cables through its FieldSmart offering.

This makes them useful for a variety of applications that include internet service providers, cable TV companies, and even cities and towns.

What differentiates Clearfield from its competitors is that it has built a reputation as a reliable and cost-effective producer, which helps customers save time and money when deploying their fiber optic networks.

Furthermore, the company is highly consumer-centric meaning that they work closely with customers to understand their needs and provide customized solutions that meet their specific requirements.

This combination allows them to develop strong long-term relationships with customers and earn their loyalty over time, meaning more profits for many years to come.

With an operating margin of 9.18% and a return on equity of 20.87%, it’s clear that the company is doing the right things by retaining a high portion of the capital that they earn and invest.

While it certainly is a proven business, you should keep in mind that its operating cash flows are relatively low at $23.77 million.

If Clearfield is unable to turn this around soon, it may be an indication that its business model is struggling.

That being said, at a P/E of just 8.01, and its shares being down over 80.12% from its all-time high, there may still be more opportunities to grow in the future.

All-in-all, Clearfield is a strong investment candidate in the fiber optic industry, worthy of further consideration.

Belden (BDC)

Market Cap: $2.76 Billion

Revenue History for Belden,
Revenue History for Clearfield,

Another solid business that is relatively small, Belden is a developer of transmitting products in the information and communication industries.

Comprised of two business segments, its first segment, Enterprise Solutions, produces things like copper cables, fiber optic cables, and various accessories to help transmit light and connect all the cables.

On the other hand, its Industrial Automation Solutions segment focuses on infrastructure components like Ethernet switches and connectors, as well as heavy-duty optic cables, that help manufacturers ensure that their machines communicate well with each other and run smoothly at all times.

Through its technical expertise and ability to develop new technologies, Belden has successfully built a global presence that serves customers in many different industries around the world.

This has allowed them to establish a well-diversified product offering, in multiple markets, making them capable of enduring any economic environment.

In regards to its financials, the company reported an operating margin of 14.40% over the trailing twelve months and a return on equity of 22.74%.

Additionally, it achieved solid operating cash flows of $362.49 million last year and possesses a total debt burden of just $1.21 billion.

At a P/E of 9.25, this fiber optic stock is a worthy investment opportunity that every investor should consider.

Arista Networks (ANET)

Market Cap: $66.12 Billion

Revenue History for Arista Networks,
Revenue History for Arista Networks,

Though not a fiber optic company itself, Arista Networks is one competitor you should take notice of.

As a producer of cloud networking solutions, the company develops a variety of cloud-based operating systems, network applications, and Ethernet routing platforms, and has established clients across all corners of the Earth.

To achieve this, Arista committed considerable time and capital over the years to developing advanced networking technology that is faster and more efficient than traditional networking solutions.

Moreover, it has built these products to be easy to use, highly scalable, and flexible, which allows them to win over many customers in this market.

With a reputation for innovation and a strong focus on cloud networking, Arista is becoming increasingly important as more businesses move their operations to the cloud.

This is demonstrated by the company’s strong financial position through which they’ve achieved Operating margins of 39.93% and an ROE of 34.91%.

In addition to this, Arista produced over $1.55 billion in operating cash flow, while only having $48.04 million in debt on its balance sheet.

One thing to keep in mind when analyzing the company is that it recently achieved an all-time high, and is now trading at a PE ratio of 35.22.

Before investing, it would be a good idea to determine what the business is worth to ensure that its current price target is sustainable in the future.

Overall, Arista Networks is a very impressive company worth diving deeper into.

Nokia (NOK)

Market Cap: $19.11 Billion

Revenue History for Nokia,
Revenue History for Nokia,

Even though the company was severely affected by the great financial crisis and the disruption of Apple’s iPhone, Nokia is a business that should not be underestimated.

Against all odds, Nokia made a successful pivot to survive, and now it is one of the top providers of network solutions in the cloud, mobile, and fixed network markets.

With four business segments under its umbrella, including network infrastructure, mobile networks, cloud and network services, and Nokia technologies, the company has built a diverse product pipeline that covers everything from 5G Networks to fiber optics and copper-based infrastructure.

Through its offerings, it has restored and maintained its global presence, and possibly even strengthened its internationally recognized brand.

As a result, the company’s revenue reached $25.77 billion, while its earnings hit $4.15 billion over the past year.

This in turn produced an operating margin of 6.68% and a return on equity of 18.78%.

Given that it has improved its Financial position drastically in recent years and It is trading at a price-to-earnings ratio of just 4.59, Nokia is without a doubt a fiber optic stock that investors should consider adding to their watch list.

Corning (GLW)

Market Cap: $23.87 Billion

Revenue History for Corning,
Revenue History for Corning,

If you prefer to invest in large-cap fiber optics stocks, then Corning is another interesting play.

The company is a manufacturer of a wide array of products including Display Technologies used in flat panel displays like those on televisions, computers, tablets, and handheld devices.

Furthermore, it produces optical fibers and cables for a diverse range of customers in the telecommunications industry.

On top of that, Corning also creates specialty materials used in a variety of semiconductors, aerospace and defense, and telecommunication components.

And just when you think it couldn’t be any more fascinating, the company also offers a boatload of laboratory products like plastic vessels and specialty surfaces, under multiple brands including Corning, Falcon, Pyrex, and Axygen brands.

What makes Corning special is its exceptional research and development capabilities, as well as its large portfolio of patents and trademarks.

These combined with manufacturing expertise allow it to produce a wide range of products more efficiently, at a lower cost, and with very little legitimate competition.

Given that Corning operates in over 20 countries, all around the world, this makes it an excellent player not only in the global fiber optics market but in a multitude of specialized markets as well.

For these reasons, the company has been able to achieve an operating margin of 7.09% and a return on equity of 5.57%.

At a P/E of 40.26, Corning is most certainly worth exploring further.

What to Keep in Mind with Fiber Optic Stocks

To determine the top fiber optics stocks to invest in, we evaluated 14 companies in total and concluded that five of them offered the most potential and were worth considering further.

When evaluating each of these businesses, we leaned on multiple financial metrics, Including the price-to-earnings ratio, operating margins, return on equity, total cash on hand, total debt, operating cash flows, and insider ownership, to help sift through the weaker options.

For one, fiber optic companies tend to be capital-intensive businesses, meaning that they spend a lot on maintenance, especially if they are laying the infrastructure for larger entities like a municipality.

For this reason, we prefer those businesses that manage less debt or are capable of paying off their debt in a shorter time as it demonstrates to us that they are in a financially healthier position.

Secondly, we put a heavy emphasis on operating margins and return on equity since both metrics reinforce that a company’s business model is successful and that its management team is competent capital allocators.

Lastly, we also hope to find businesses trading at a lower price-to-earnings multiple given that it typically indicates that a business is undervalued.

That being said, there are exceptions to this rule, meaning that we would need to conduct a more diligent valuation process if we wish to be truly confident in our assessment.

All-in-all, we relied on this data and more to help figure out our top five list.

If you plan to analyze fiber optic stocks on your own, then these metrics are worthwhile considering.

Final Thoughts

With so many opportunities available in the fiber optics industry, it is clear why investors may want to dip their toes in this profitable market.

As demonstrated by the fiber optics stocks mentioned in this article, those companies that have either penetrated a niche or established a massive foothold in an industry or community, are likely to remain profitable and growing for many years.

That being said, investors should be cautious given the complexity of this Market and the oftentimes significant sums of debt used by these businesses.

Therefore, if you wish to make the most of this opportunity, then the best thing you can do is to dive deeper into this market and determine a fiber optic stock that is best for you.

All-in-all, fiber optics is a captivating Market and is likely to expand in the coming years.

If you can find an excellent company trading at a reasonable price, then you may make more money than you ever expected.

We are not brokers, investment, or financial advisers; you should not rely on the information herein as investment advice. If you are seeking personalized investment advice, please contact a qualified and registered broker, investment adviser, or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Please do your own research before investing, including reading the companies’ public filings, press releases, and risk disclosures. The company provided information in this profile, extracted from public filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it. The commentary and opinions in this article are our own, so please do your own research.
Copyright © 2023 Edge Investments, All rights reserved.

  • Declan O’Flaherty

    Declan holds a Bachelor of Commerce from the University of Alberta and has over 4 years of experience investing in financial markets. As a fundamental investor, Declan embraces the investment principles of Warren Buffett and his disciples. This puts a focus on finding businesses with healthy financials, competent and accountable leader, enduring competitive advantages, and those that are selling at discount to what they are worth.

    View all posts

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