Is Alcatel-Lucent a Dangerous Investment?

With shares of Alcatel-Lucent (NYSE:ALU) trading at around $1.39, is ALU an OUTPERFORM, WAIT AND SEE or STAY AWAY? Lets analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stocks Movement

Deutsche Bank recently upgraded Alcatel-Lucent from Hold to Buy. This was primarily related to the new CEO Michel Combes. He has a successful history of cutting costs. He will reveal his cost-cutting plan in June, which Alcatel-Lucent longs eagerly await. Combes will likely want to make some radical moves, but its possible that the board will get in the way. Well see how it all plays out.

At the current time, there are many negatives for Alcatel-Lucent. They include:

  • A lack of products generating impressive revenue
  • Recent history of missing expectations
  • Consistent decline in annual revenue
  • Weak margins
  • Poor cash flow
  • European weakness
  • Poor stock performance in bull market
  • Burning through cash
  • China slowing

It doesnt look like a good situation, but a new CEO does offer hope. Well get to an opinion later. For now, lets get to some comparative numbers. The chart below compares fundamentals for Alcatel-Lucent, Ericsson (NASDAQ:ERIC) and Cisco Systems (NASDAQ:CSCO). Alcatel-Lucent has a market cap of $3.09 billion, Ericsson has a market cap of $38.10 billion, and Cisco has a market cap of $110.91 billion.

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ALU

ERIC

CSCO

Trailing P/E

N/A

44.31

11.96

Forward P/E

136.00

13.29

9.90

Profit Margin

-9.51%

2.54%

19.72%

ROE

-58.06%

4.18%

17.78%

Operating Cash Flow

-$240.81 Million

$3.31 Billion

$11.87 Billion

Dividend Yield

N/A

2.60%

3.20%

Short Position

N/A

N/A

0.29

 

Lets take a look at some more important numbers prior to forming an opinion on this stock…

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