Computer hardware manufacturer SMART Modular Technologies (NASDAQ:SMOD) reports second-quarter 2007 earnings tomorrow night, covering a period ended Feb. 23. Let's take this company apart and see how smart it looks inside.

What analysts say:

  • Buy, sell, or waffle? Nine analysts follow SMART today, according to Reuters Estimates -- and every single one of them rates the stock a buy. Our Motley Fool CAPS community largely agrees. It's a four-star CAPS stock based on 64 player ratings.
  • Revenues. The average analyst thinks we'll see $235 million in net revenue, 44% higher than the year-ago total of $163.7 million. That's smack in the middle of management's guidance range, $230 million to $240 million.
  • Earnings. The Wall Street forecast calls for $0.21 per share, or about 40% more than the $0.15 produced last year, pro forma. The official guidance says $0.20 to $0.21 per share, and none of the analysts strayed from that range.

What management says:
SMART is incorporated in the Cayman Islands, though corporate headquarters are in Fremont, Calif. The company works with companies like AMD (NYSE:AMD), Intel (NASDAQ:INTC), Samsung, and a variety of motherboard manufacturers to optimize the performance and stability of its memory modules, input/output components, and other system elements.

Of course, competitors like Micron (NYSE:MU) and STEC (NASDAQ:STEC) do the same thing. What makes SMART different, according to its SEC filings, is its build-to-order strategy and a focus on high-margin products. For a company with such modest revenues and just three years of operating history, SMART has an impressive customer list, including Intel, Motorola (NYSE:MOT), and IBM (NYSE:IBM).

What management does:
Gross margins have stagnated somewhat, as an industry-wide oversupply of some memory technologies and LCD screens pushed down prices. Operating results have remained rather stable, but quarterly cash flows have been jumping all over the place. Sophomore jitters? Maybe. But it's hard to estimate future cash flows when the history is so uneven.

Margin

8/2005

11/2005

2/2006

5/2006

8/2006

11/2006

Gross

16.7%

18.0%

18.9%

18.9%

17.9%

17.1%

Operating

7.4%

8.6%

8.9%

8.7%

8.2%

8.1%

Net

4.3%

5.1%

4.0%

3.9%

4.6%

4.8%

FCF/Revenue

8.1%

2.7%

0.2%

(4.3%)

(2.8%)

0.7%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
You won't find SMART products on the shelves of your friendly neighborhood big-box electronics retailer, though you might run across the name at online resellers. No, SMART's focus is on the tech industry, not on consumer retail. The company has manufacturing facilities on four continents, so it can provide quick-turnaround service almost anywhere. The breathless revenue growth rates tell me that its customers appreciate that.

As for tomorrow's report, SMART has a tendency to beat its own guidance by a penny or two. That "underpromise and overdeliver" strategy is okay by me.

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Fool contributor Anders Bylund is an AMD shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is good for you.