In the week since backscatter X-ray device maker American Science & Engineering (ASEI) reported earnings, its stock has run up nearly 11.5% in just four trading days. Can shares continue this run?

That's what we're here to find out. Let's start with a quick review of the numbers. In the third quarter of its fiscal 2015, AS&E reported:

  • Sales down 2% year over year at $37 million (but gross profit up on lower input costs).
  • Significant declines in selling, general, and administrative expenses, and also in research and development spending, adding up to an 8% reduction in operating spending -- and a 440-basis-point boost in operating margin to 10.4%.
  • All of which sent profit per diluted share up 60% to $0.32.

In short, after an exceedingly iffy first half of the year, the third quarter was very good to AS&E.

But even after that strong rebound, AS&E's year-to-date sales are down by more than 23%, with net profit of just a penny a share. (Yes, you read that right. All the profit the company has earned this year, it earned in the just-ended quarter. It took the third quarter to put AS&E back in the black.)

Even now, it's not possible to be certain AS&E is out of the woods just yet. In addition to generally accepted accounting principles profitability, positive free cash flow returned in the third quarter, with management boasting of $11.3 million in free cash generated. Year to date, however, the company remains in the red on this statistic, with more than $43 million in cash burned in its first three quarters.

Which kind of raises the question: If things are so bad...

...then why are investors buying AS&E?
Excellent question. It could be that investors were encouraged by AS&E management touting its "MINI Z" screening system (a handheld X-ray machine) as having been named "Best of What's New for 2014" by Popular Science. Or investors might be putting faith in CEO Chuck Dougherty's promise to "capture the increased global opportunities for our expanded portfolio of product and service offerings" going forward.

From my perspective, though, actions are more important than words (or awards). And the fact that AS&E booked only $57.6 million in new orders in the first nine months of fiscal 2015 -- with no noticeable uptick in bookings in the third quarter -- tells me business won't get much better at AS&E in the near future.

When you get right down to it, $57.6 million is really the only number you need to know here to see how the company is doing. This number means AS&E collected only enough new orders to replace 60% of the revenue it booked for old orders fulfilled in the first three quarters of the year -- and less than half the revenue booked in the same three quarters last year.

Long story short? The slowdown continues. AS&E's stock price might be looking up, but its business most definitely is not.