On Sept. 4, optical component maker Avanex (NASDAQ:AVNX) released earnings for the 2007 fiscal year, ended June 30.

  • Margins and revenue are both moving in the right direction, creating a significant improvement on the bottom line. Management likes to point out that Avanex broke even in the fourth quarter on a pro forma basis, and it hopes to do the same in GAAP terms soon.
  • What isn't going the right way is share dilution. I understand the need to raise some cash to finance operations, but a 30% increase in the share count seems a little excessive, even for a smallish growth stock.
  • Avanex is a middling three-star Motley Fool CAPS stock today, ahead of rivals Bookham (NASDAQ:BKHM) and JDS Uniphase (NASDAQ:JDSU), but the same as three-star performer Finisar (NASDAQ:FNSR).

(Figures in millions, except per-share data)

Income Statement Highlights

FY 2007

FY 2006

Change

Sales

$212.8

$162.9

30.6%

Net Profit

($30.6)

($54.7)

44.0%

EPS

($0.14)

($0.34)

58.8%

Diluted Shares

213.0

163.2

30.5%

Get back to basics with the income statement.

Margin Checkup

FY 2007

FY 2006

Change*

Gross Margin

18.0%

5.2%

12.8

Operating Margin

(15.3%)

(29.0%)

13.7

Net Margin

(14.4%)

(33.6%)

19.2

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

FY 2007

FY 2006

Change

Cash + ST Invest.

$43.8

$67.7

(35.3%)

Accounts Rec.

$33.8

$26.8

26.1%

Inventory

$15.2

$18.4

(17.5%)

Liabilities

FY 2007

FY 2006

Change

Accounts Payable

$32.5

$38.3

(15.0%)

Long-Term Debt

$0.0

$4.6

N/A

The balance sheet reflects the company's health.

Cash Flow Highlights
Free cash flow is a Fool's best friend. But Avanex wouldn't let our buddy come out and play today. Rats!

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned. Fool rules are here.