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Why Alliance Fiber Optic Products (AFOP) Stock Is Higher Today

NEW YORK (TheStreet) -- Alliance Fiber Optic Products (AFOP - Get Report) shares are up 14.91% to $17.03 Wednesday morning after the company pre-announced a strong first quarter.

The company, which manufactures fiber optic components for communications equipment, announced early Wednesday morning that they expected to report first quarter revenue of $24.8 million, above previous guidance of $22.5 million.

By the time the market opened, Alliance Fiber Optic Products had reported their preliminary results with over 100% year-over-year revenue growth.

"For the first quarter of 2014, the Company expects to report the sales of approximately $24.8million, which represents 104% revenue increase from the year ago quarter and is 10% higher than the $22.5million revenue guidance issued on Feb 03, 2014," Alliance Fiber Optic Products said.

With their record quarterly sales the company also expects to announce record quarterly profits. Full first quarter results will be announced on April 24. 

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TheStreet Ratings team rates ALLIANCE FIBER OPTIC PRODUCT as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate ALLIANCE FIBER OPTIC PRODUCT (AFOP) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, notable return on equity, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AFOP's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 79.3%. 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.
  • AFOP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.10, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, ALLIANCE FIBER OPTIC PRODUCT's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to its closing price of one year ago, AFOP's share price has jumped by 117.70%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AFOP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 39.32% is the gross profit margin for ALLIANCE FIBER OPTIC PRODUCT which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 21.64% trails the industry average.
  • You can view the full analysis from the report here: AFOP Ratings Report

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