Why I Love Infinera Corporation

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I don't own any shares of fiber-optic networking specialist Infinera (NASDAQ: INFN), but this stock is always on my short list of strong investment ideas.

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Let me show you why I love Infinera, both as a business and as an investment idea.

Infinera's business platform

The company builds high-speed networking systems that range from data-center interconnects to base stations for long-distance undersea cables. Infinera also supplies software for managing these connections, along with support services for all of these products.

For example, the company recently reported record-breaking networking speed and efficiency across the 6,500-mile Seabras-1 cable that connects New Jersey to Sao Paolo, Brazil. When this cable is lit up for commercial operations later this quarter, it will provide a low-latency connection of 72 terabits per second, intended to serve the Brazilian stock market and other time-sensitive operations. Infinera's fiber endpoints are a key ingredient in this intercontinental networking solution.

The fiber-optic networking industry as a whole is experiencing a rough patch right now, as telecoms around the globe are drawing up their plans for the next generation of wired and wireless networks but not yet ready to place their hardware orders. As a reminder, faster wireless networks also need high-speed links from their radio towers to the internet backbone, and fiber optic solutions are other the perfect solution for this. Furthermore, a wave of consolidation in the North American cable and telecom markets has shortened Infinera's customer list somewhat.

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So Infinera's incoming order volume has slowed down in recent quarters, alongside similar declines across the industry. But things have started to turn around in several key markets, and the long-term opportunity for optical networking specialists remains as robust as ever. In particular, business is picking up in Asia and Latin America while European and North American are dragging their feet.

The investment case

The only reason not to buy fiber-optic networking stocks right now is if you believe that a certain ticker will succumb to that list of short-term financial pressures before the turnaround starts in earnest. Infinera would not be that kind of risky ticker.

Yes, the company has reported negative earnings in the last three quarters, causing the stock to trade sideways over the last year while the broader market enjoyed a 16% surge. But operating cash flows have hovered around the breakeven point throughout this difficult period, and Infinera's pristine balance sheet matches a $258 million cash reserve with a blank line for long-term debts. This company is not likely to be forced out of business by a handful of slow quarters.

Meanwhile, Infinera shares are trading at attractive price-to-sales and price-to-book ratios, even in the context of other depressed optical networking stocks. Looking ahead, analysts have pinned a sector-leading earnings growth rate of 20% per year on the company for the next five years.

So we're looking at a leader in a promising industry, whose share prices are held down by short-term worries. If you're not ready to buy Infinera today based on that simple investment thesis, the ticker surely belongs on your own list of interesting ideas for further research -- or for a quick pounce if share prices drop again for unconvincing reasons.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Infinera. The Motley Fool has a disclosure policy.