Why FormFactor Stock Plummeted This Week
Key Points
Investors are having some concerns about FormFactor's valuaiton profile.
The company is posting strong growth, but its Q1 report wasn't enough to prevent sell-offs this week.
FormFactor's forward guidance looks encouraging.
FormFactor (NASDAQ: FORM) stock got hit with a big pullback this week. The company's share price ended the stretch down 11.6%. Over the same period, the S&P 500 was up 0.9%, and the Nasdaq Composite was up 1.1%.
FormFactor started this week's trading on a bearish note, with investors moving out of the stock ahead of earnings in response to valuation concerns. Despite some post-earnings recovery, the company's share price still ended the week down double digits.
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FormFactor actually served up strong Q1 results
After the market closed on April 29, FormFactor published its first-quarter results and reported sales and earnings for the period that came in ahead of Wall Street's expectations. The company recorded non-GAAP (adjusted) earnings per share of $0.56 on sales of roughly $226.1 million. Adjusted earnings per share for the period beat the average analyst estimate by $0.13, and sales came in $0.94 million higher than anticipated. Revenue surged nearly 32% higher year over year, and adjusted earnings per share improved dramatically over the per-share profit of $0.23 reported in the prior-year period.
What's next for FormFactor?
In addition to posting big performance beats in Q1, FormFactor also issued forward guidance that beat Wall Street's targets. The company is guiding for adjusted earnings of roughly $0.61 on sales of roughly $240 million in the current quarter -- substantially exceeding the average analyst estimate's target for adjusted earnings of $0.45 per share on revenue of $227.7 million.
FormFactor stock actually initially saw a substantial rally following its Q1 report and new guidance, but the company's valuation gains receded as trading progressed. With the stock still up roughly 354% over the last year even after its recent pullback, investors are having some valuation concerns even though the business is delivering strong results.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.