What happened

Shares of FormFactor (NASDAQ:FORM) are soaring today, up 10% as of 11:42 a.m. EDT, after the equipment supplier to the semiconductor industry reported second-quarter results.

So what

Here are the headline numbers from the quarter: 

  • Revenue grew 1.9% to $138 million. This was at the high end of management's guidance range and matched the consensus estimate on Wall Street.
  • Adjusted net income fell 21% to $16.4 million. 
  • Adjusted EPS dropped 22% to $0.21. That was $0.02 higher than what market watchers had predicted.
Business people giving high five

Image source: Getty Images.

Shifting to guidance, here's what management predicts will happen in the upcoming quarter:

Metric Q3 2019 Guidance Range Q3 2018 Actual Change at Midpoint
Revenue $137 million to $145 million $135 million 4.4%
Adjusted EPS $0.18 to $0.24 $0.26 (19%)

Data source: FormFactor. 

Analysts are currently predicting that FormFactor will pull in $137.7 million in revenue for the upcoming quarter with earnings of $0.21 per share. While this guidance isn't great in absolute terms, it is being viewed as good news when compared to the consensus estimate on Wall Street.

Now what

FormFactor's ability to generate revenue growth is a great sign given that the semiconductor industry is in a bit of a slump right now. That should give investors confidence that management will be able to reach its long-term financial targets once the cycle turns.

However, management hopes to reach about $1.25 in adjusted EPS when everything is going well. That means that shares are currently trading for about 15 times earnings in the most optimistic scenario. My view is that is too high of a price to pay for a company with a spotty history. I'm content to focus my attention on other businesses that hold better long-term potential.

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.