Today's Perilous Reversal Stock: Alliance Fiber Optic Products (AFOP)

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 $21.3 million.
  • AFOP has traded 400,603 shares today.
  • AFOP is down 3% today.
  • AFOP was up 6.9% 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%. AFOP has a PE ratio of 14.5. Currently there are 2 analysts that rate Alliance Fiber Optic Products a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Alliance Fiber Optic Products has been 677,300 shares per day over the past 30 days. Alliance Fiber Optic has a market cap of $338.3 million and is part of the technology sector and electronics industry. The stock has a beta of 0.97 and a short float of 32.7% with 1.82 days to cover. Shares are up 30.4% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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, solid stock price performance and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • AFOP's very impressive revenue growth greatly exceeded the industry average of 3.9%. Since the same quarter one year prior, revenues leaped by 104.7%. Growth in the company's revenue appears to have helped boost the 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 3.36, which clearly demonstrates the ability to cover short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Communications Equipment industry and the overall market, ALLIANCE FIBER OPTIC PRODUCT's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Powered by its strong earnings growth of 147.61% and other important driving factors, this stock has surged by 143.98% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • ALLIANCE FIBER OPTIC PRODUCT reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALLIANCE FIBER OPTIC PRODUCT increased its bottom line by earning $1.01 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus $1.01).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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