Could OmniVisionTechnologies (NASDAQ:OVTI) be on the cusp of better days? It's been a tough year for this developer of imaging sensing semiconductors, and the stock ended regular trading yesterday about one-third off its 52-week high. But after first-quarter results were reported last night, the stock climbed strongly in after-hours trading.

On first blush, you might wonder why investors got so excited about the results. After all, revenue of $96 million was basically in line with the mean estimate, and the reported $0.24 earnings per share were a bit below the average. Once again, margins were quite weak; both gross and operating margins fell significantly from their year-ago levels.

Ahh, but then there's the guidance. OmniVision management predicted a revenue midpoint of $115 million -- almost 12% higher than the current average estimate, suggesting year-over-year growth of about 36%. Earnings-per-share guidance was also raised to a range of $0.28 to $0.33 vs. the present estimate of $0.29.

Honestly, I'm a bit surprised to see the stock indicated up 15% in pre-market trading on this sort of guidance. Yes, the revenue boost is nice, but revenue isn't really the name of the game. Profits ultimately drive a company's success.

Furthermore, this sort of guidance would suggest that ongoing margin pressures are a real issue. Competitors like Micron (NYSE:MU), STMicrolectronics (NYSE:STM), and Samsung aren't going away, and it looks like they're having a definite impact on pricing and profitability. In addition, cell phone companies like Nokia (NYSE:NOK) have a tough reputation on pricing; they've been known to play suppliers off one another to boost their own results.

One aspect working in OmniVision's favor is the structure of the company. Since it outsources the fabrication of its products, it lacks an aging capital base. This boosts the amount of free cash flow that the company can produce at a given level of sales or earnings. It should help mitigate some of the impact of lower margins.

There's no doubt that OmniVision serves growing markets with meaningful potential. It has a lot of cash on the books and no debt. I can't quite see this company building the sort of long-term competitive economic edge that I favor, but I wouldn't rule out its ability to grow beyond current valuations.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).