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FARO Technologies - Aggressive Growth
4/23/2012 1:00:00 AM
FARO Technologies ( FARO ) is a Zacks #1 Rank (Strong Buy) ) after beating the Zacks Consensus Estimate in two straight quarters and seeing subsequent increases in earnings estimates.
FARO Technologies designs, and manufactures and supports software-based three-dimensional measurement and imaging systems for manufacturing, industrial, building construction, and forensic applications. It serves the automobile, aerospace, and heavy equipment markets, as well as law enforcement agencies in the Americas, Europe, Africa, and the Asia Pacific. FARO Technologies, Inc. was founded in 1981 and is headquartered in Lake Mary, Florida.
FARO Technologies Beats Expectations for Two Straight Quarters
FARO Technologies has topped the Zacks Consensus Estimate in each of the last two quarters. The three quarters prior to the two beats, the company had mixed results of two misses and one beat. Of those three quarters, the stock moved substantially following each report, but the average of the three is very close to zero as it moved up significantly on the beat and down modestly on the two misses.
The September 2011 quarter was the first of the two earnings beats and it was the bigger of the two. FARO Technologies reported earnings of $0.38 per shares, $0.09 or 31% ahead of the Zacks Consensus Estimate. The stock was up 12.6% following the earnings report.
FARO Technologies Recently Reported Earnings
On February 28, 2012 the company reported revenue of $77 million approximately $3 million ahead of the Zacks Consensus Estimate and higher than the $59 million reported in the year ago period. EPS of $0.56 was $0.05 ahead of the Zacks Consensus Estimate for a beat of 9.8%. The stock moved lower by 4.7% following the report.
Earnings Estimates Bumped Up
Following the most recent earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $1.86 in January 2012 to the current level of $2.03.
FARO Technologies valuation is well above the industry average for three of the four metrics that aggressive growth investors tend to examine. The trailing twelve months PE of 38x is more than double the industry average of 16x. Similarly, the forward PE of 26x is more than double the industry average of 12x. Price to sales of 3.5x is higher than the industry average of 2.5x to round out the three metrics that show the premium valuation for FARO Technologies. The lone metric that shows the company trading at a discount is the more conservative measure of price to book, with the company trading at 3.6x compared to the 4.5x industry average.
When we look at the price and consensus chart for FARO Technologies, we see that earnings estimates have continuously trailed the trend line performance of the stock. Yes there are a few instances of the stock pulling back beneath the estimates, but for the most part the stock moves higher faster than the earnings move higher. The sizable gaps in recent years estimates show the growth rate of earnings is growing, another attribute that aggressive growth stock investors tend to look for. FARO Technologies is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service You can follow him at twitter.com/bbolan1
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