What happened
Shares of semiconductor testing and production equipment manufacturer Aehr Test Systems (AEHR 1.50%) plunged 17% through 10:30 a.m. ET on Friday despite exceeding analyst targets for both sales and earnings in its fiscal Q1 2024 report last night.
Heading into earnings, analysts had forecast Aehr would earn $0.16 per share, pro forma, on sales of $19.2 million. In fact, Aehr earned $0.18 per share on sales of $20.6 million, beating on both the top and bottom lines.
So what
And that wasn't even the best part. Aehr reported astoundingly strong 93% sales growth for its first fiscal quarter 2023.
On earnings, the company's GAAP profit was only $0.16 per share. (The $0.18 was a non-GAAP number.) But even so, $0.16 per share was eight times the profit the company earned in the year-ago quarter. (Non-GAAP profitability was up by more than triple.)
Now what
All that being said, the bad news is that Aehr noted its bookings for the quarter were a weak $18.4 million -- not enough to replace the sales executed on in the quarter, and implying a slowdown in business going forward.
It's also perhaps worth highlighting that while the company's total reported net profit for the quarter was a strong $4.7 million, actual cash profits -- free cash flow -- came in significantly weaker at just $3.6 million, indicating that the quality of Aehr's earnings may not be as strong as it seems.
And indeed, management did forecast something of a slowdown from Q1's blistering pace as the year progresses. This year, Aehr says investors can expect sales to grow about 50% year over year, and profits to be up by "over 90%."
All that being said, this still implies that Aehr might earn as much as $28 million this year, valuing the stock at about 38 times current year earnings. For a company growing sales at 50% and earnings at nearly twice that rate, that still sounds like a bargain price to me.
Assuming, of course, that Aehr can deliver at least all the growth that it has promised.
