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Alliance Fiber Optic Products (AFOP) In A Perilous Reversal

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Alliance Fiber Optic Products ( AFOP) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Alliance Fiber Optic Products as such a stock due to the following factors:

  • AFOP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.8 million.
  • AFOP has traded 68,820 shares today.
  • AFOP is down 3.3% today.
  • AFOP was up 6.5% yesterday.

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More details on AFOP:

Alliance Fiber Optic Products, Inc. designs, manufactures, and markets various fiber optic components and integrated modules for communications equipment manufacturers and service providers in North America, Europe, and Asia. The stock currently has a dividend yield of 1.1%. AFOP has a PE ratio of 10.2. Currently there is 1 analyst that rates Alliance Fiber Optic Products a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Alliance Fiber Optic Products has been 740,500 shares per day over the past 30 days. Alliance Fiber Optic has a market cap of $247.1 million and is part of the technology sector and electronics industry. The stock has a beta of 0.85 and a short float of 21.7% with 2.89 days to cover. Shares are down 5.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Alliance Fiber Optic Products as a buy. 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, reasonable valuation levels 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 ratings report include:

  • The revenue growth came in higher than the industry average of 0.7%. Since the same quarter one year prior, revenues rose by 27.1%. 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 3.55, 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.
  • 42.99% 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. Despite the strong results of the gross profit margin, AFOP's net profit margin of 15.62% significantly trails the industry average.

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