5-Star Stocks Poised to Pop: FormFactor

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Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, chip-testing equipment maker FormFactor (Nasdaq: FORM) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at FormFactor's business and see what CAPS investors are saying about the stock right now.

FormFactor facts

Headquarters (Founded)

Livermore, Calif. (1993)

Market Cap

$848.35 million

Industry

Semiconductor equipment

Trailing-12-Month Revenue

$142.2 million

Management

CEO Mario Ruscev (since 2008)
CFO Jean Vernet (since 2008)

Return on Capital (Average, Past 3 Years)

(3.4%)

Cash / Debt

$462.6 million / $0

Major Customers

Intel (Nasdaq: INTC)
Elpida Memory

CAPS Members Bullish on FORM Also Bullish on

Portfolio Recovery Associates (Nasdaq: PRAA)
Middleby (Nasdaq: MIDD)

CAPS Members Bearish on FORM Also Bearish on

Raser Technologies (NYSE: RZ)
D.R. Horton (NYSE: DHI)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 98% of the 1,118 members who have rated FormFactor believe the stock will outperform the S&P 500 going forward. These bulls include fundamentalsrock and All-Star Gtrinvestor, who is ranked in the top 0.05% of our community.

Just last week, fundamentalsrock strongly advised Fools to stay true to FormFactor:

The movement to DDR3 will, eventually, make [FormFactor] a superstar. In the meantime, it is a [Motley Fool] Hidden Gems selection, has great management, and has had no disappointments. Its stock has tanked recently for no good reason, so it's time to buy!

In an earlier pitch, CREWatcher  chipped in with a list of several captivating catalysts:

- Apple (Nasdaq: AAPL) is highly likely to bring another cool new game changing gadget to market that will add demand for more small DRAM, flash, and logic chips.
- Solid state hard drives based on flash seem to be taking a piece of the hard drive market, starting with laptops, and will increase the demand for flash chips.
- Vista flopped, creating extra pent up demand for Windows 7, and setting up the October launch of Windows 7 to trigger a bigger than usual upgrade cycle.
- Chip makers have held off on equipment upgrades during a nearly 2 year down cycle in their market, leaving a lot of aging test equipment ripe for replacement.

What do you think about FormFactor, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!  

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. FormFactor, Portfolio Recovery, and Middleby are all Motley Fool Hidden Gems picks. Intel is a choice of Inside Value, and Apple is a selection of Stock Advisor. The Fool owns shares of FormFactor. The Fool's disclosure policy always gets a perfect score.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 09, 2009, at 2:38 PM, RHinCT wrote:

    I find it confusing that this article, dated today, is based on the grand announcement that FormFactor, Inc. (FORM) "has earned a coveted five-star ranking", yet when (around 2:15pm EST) I click on the link and view it at http://caps.fool.com/Ticker/FORM.aspx there are four (4) gold stars, not five.

  • Report this Comment On November 10, 2009, at 10:30 AM, Shindoesca wrote:

    Looking at their revenue growth and shareholder equity over the last 3 years, their operating margin and P/S, it's not exactly a slam dunk.

    http://quote.morningstar.com/stock/s.aspx?t=FORM

    Their relative sector valuation and debt situation may be favorable, but at the same time you have other (mostly chinese) companies also without debt, but with positive cash flow, decent revenue growth and a P/B less then 1.0.

    Not convinced yet..

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