Why FormFactor (FORM) Stock Is Up Today

NEW YORK (TheStreet) -- FormFactor (FORM) was gaining 16.8% to $7.15 Wednesday after increasing its guidance for the second quarter.

The company increased its second quarter revenue forecast to between $65 million and $69 million from between $62 million and $66 million. The new guidance is above the Capital IQ Consensus Estimates, which expects $63.5 million in revenue for the quarter. FormFactor also increased its margin guidance to 34% to 37% from 31% to 34%.

FormFactor said it's seeing strong demand from System-on-Chip and DRAM manufacturers, a trend echoed by Applied Materials (AMAT). The company will further discuss its guidance at its Cowen conference presentation on May 29.

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TheStreet Ratings team rates FORMFACTOR INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate FORMFACTOR INC (FORM) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins."

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

  • FORM's revenue growth has slightly outpaced the industry average of 4.1%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the 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 4.81, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, FORMFACTOR INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for FORMFACTOR INC is rather low; currently it is at 22.03%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -22.71% is significantly below that of the industry average.
  • You can view the full analysis from the report here: FORM Ratings Report

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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.

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