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FormFactor Inc. Stock Upgraded (FORM)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- FormFactor (Nasdaq: FORM) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and unimpressive growth in net income.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • FORM's very impressive revenue growth greatly exceeded the industry average of 14.9%. Since the same quarter one year prior, revenues leaped by 51.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • FORM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.20, which clearly demonstrates the ability to cover short-term cash needs.
  • FORMFACTOR INC's earnings per share declined by 5.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FORMFACTOR INC continued to lose money by earning -$0.71 versus -$1.31 in the prior year. This year, the market expects an improvement in earnings (-$0.13 versus -$0.71).
  • In its most recent trading session, FORM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for FORMFACTOR INC is currently lower than what is desirable, coming in at 31.30%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, FORM's net profit margin of -37.57% significantly underperformed when compared to the industry average.
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FormFactor, Inc. designs, develops, manufactures, sells, and supports semiconductor wafer probe card products and solutions for semiconductor manufacturers. FormFactor has a market cap of $302.6 million and is part of the technology sector and electronics industry. Shares are up 23% year to date as of the close of trading on Tuesday.

You can view the full FormFactor Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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