What happened
Shares of Richardson Electronics (RELL 0.35%) are sinking Thursday following the company's recent fourth-quarter report. The engineering services company's stock was down 12.3% as of 2 p.m. ET, according to data from S&P Global Market Intelligence.
Richardson Electronics published earnings results after the market closed yesterday, delivering sales and earnings performance for the period that fell short of the market's expectations. The company posted non-GAAP (adjusted) earnings per share of $0.11 on revenue of $58.83 million, while the average analyst estimate had guided for per-share earnings of $0.19 on revenue of $61.5 million.
So what
Sales fell 4.5% year over year in the company's fourth quarter, which ended May 27. While sales for the company's green energy solutions segment expanded 61.7% compared to the prior-year period, declines for its power and microwave technologies and Canvys display technologies business led to an overall decline in revenue. The company's gross margin also dipped to 27.9%, down from 32.7% in last year's fourth quarter due to a less favorable product mix.
While the company still ended its last fiscal year with overall revenue rising 16.9% annually to reach $262.7 million, the disappointing sales and margin performance in Q4 is prompting a significant sell-off for the company's stock.
Now what
Richardson Electronics stock is now down roughly 36.5% year to date. Following the recent pullback, shares are trading at roughly 11.4 times this year's expected earnings and roughly 66% of expected forward sales.
RELL PS Ratio (Forward) data by YCharts
By some metrics, Richardson Electronics' stock looks cheaply valued, but it remains to be seen if the business will be able to return to stronger growth. The company anticipates that demand in its semiconductor wafer fab market will remain under pressure in the near term, and charting demand for its green energy solutions continues to involve a heavy element of speculation.
