No two ways about it -- this has been a great week for tech. First, Cisco rang that ol' tech bellwether with a pennywide earnings beat. Then three of The Motley Fool's most favoritest of companies launched into an incredible laser-light extravaganza.
First, fiber laser maker IPG Photonics
- Fiscal Q3 2008 sales jumped 23%, accelerating the pace of growth set earlier in the year.
- Likewise with profits, which leapt 20% to $0.54 per share.
- Inventories grew 33% year over year, and accounts receivable were up 30%.
Which, dear Fools, is why I have to lump Rofin's results in with IPG's (which I didn't like) rather than II-VI's (which I did.)
Why? Partially because Rofin's operating margin dropped to 15.7% -- narrowing the company's lead over rivals Excel Tech
Management has yet to provide us a cash flow statement in its release, but on the post-earnings conference, it spilled the beans that free cash flow ran negative to the tune of $4.2 million. Not good.
... and a caveat
Still, there is hope that Rofin will turn things around. Backlog hit a record $149.3 million in June. That's up 31% since June of last year, and faster than sales growth. I find this encouraging because, as II-VI has shown us, fast-growing backlog can predict improved future sales. Such sales could soak up Rofin's accumulated inventories, solving the problem over time.
The small-cap gemologists at Motley Fool Hidden Gems are grinning ear to ear this week, but which company makes them smile wider: recommendation Rofin-Sinar or recommendation II-VI? IPG Photonics is a Motley Fool Rule Breakers pick. The Motley Fool owns shares in IPG Photonics.