II(-VI) Legit to Quit

Wow. That was quick. (But hardly original.)

After reporting simply superb earnings yesterday (sales up 17%, profits nearly triple their year-ago levels), shares of Motley Fool Hidden Gems recommendation II-VI (Nasdaq: IIVI) surged nearly 9%. One day later, the stock has already given back 2% of those gains. Why?

Why indeed?
Let me put this as clearly as I can: II-VI is a buy. This is a stock you want to own, and today's sell-off is a gift. Take advantage of it.

Now that I've said that, let me explain why you must own II-VI. It's not because the company tripled its profits -- on the contrary, that surge was basically a one-shot deal caused by the firm booking a $0.52-per-share gain on the sale of its interest in Canadian 5NPlus, Inc.

Nor do you want to buy II-VI because it beat estimates both with and without that one-time gain. Skeptics who believed the firm would earn only $0.34 per share yesterday were no doubt chagrined to learn that II-VI earned $0.36 instead. They can take some comfort, however, in the fact that II-VI missed the Street's revenue target, falling about $2.9 million short of the projected $77.2 million in sales.

But not for long
No, the real reason you need to own II-VI is that as good as yesterday's news was, tomorrow's will be even better. You see, II-VI may have come up short on sales last quarter, but going forward, those sales will accelerate. How do I know this? According to the press release, new orders -- booked by customers that include Boeing (NYSE: BA) and Northrop (NYSE: NOC), Raytheon (NYSE: RTN) and General Dynamics (NYSE: GD), Caterpillar (NYSE: CAT), and fellow Hidden Gems pick Rofin-Sinar (Nasdaq: RSTI) -- are up 27% versus this time last year.

17% sales growth last quarter -- plus 27% growth in new orders waiting to be filled -- tells me that this firm is accelerating its pace of sales. That suggests that analysts are being overly conservative in predicting just 18% profits growth this year and 22% for next year. When they're forced to raise their estimates, I expect we'll see the share price rise in tandem.