What happened

Shares of Coherent, Inc. (NASDAQ:COHR) are getting zapped today, down 17.1% as of 12 p.m. EST, after the laser maker announced strong earnings coupled with a disappointing outlook.

Coherent reported its financial results for fiscal Q1 2018 last night, slightly edging out analyst predictions of $3.52 per share in pro forma profit by earning $3.54 instead, and beating on revenue as well.

Red laser beam

Investors took aim at Coherent's margins warning on Thursday. Image source: Getty Images.

Sales of $477.6 million rose 38% in comparison to last year's Q1, and pro forma profits spiked 38% higher. GAAP profits were also up 36% to $1.67 per diluted share despite being hit hard by one-time charges that included effects from the recently passed Tax Cuts and Jobs Act.

So what

Instead of being wowed by those results, however, it appears that investors are fleeing Coherent stock based on what an analyst called "a lower-than-expected guide for fiscal Q2 margins, due to the negative impact from the stronger euro." Coherent didn't provide guidance on what exactly it expects to earn this quarter (or this year). But just the hint of margin weakness appears to have spooked investors.

This is despite the fact that management confirmed it sees no signs of either "customers seeking to delay or cancel deliveries" of its products, or of revenue otherwise being vulnerable to falling short of management's "expectations" -- whatever those may be.

Now what

Management's calming words notwithstanding, investors are fleeing Coherent stock in droves. Is that the right call?

At $6.2 billion in market capitalization prior to earnings, and with minimal net debt on its books, and $219 million in trailing earnings and $294 million in trailing free cash flow, I calculate Coherent's price-to-earnings ratio at approximately 28 -- and its P/FCF ratio at only 21. Those valuations may have looked a bit rich given that analysts were predicting a 17.5% long-term growth rate for Coherent heading into earnings.

With Coherent's market cap falling to less than $5.3 billion post earnings, however, the stock now looks fairly priced to me. If it falls any further, I think I'd be a buyer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.