All last year, laser company II-VI (NYSE:IIVI) lit up Wall Street's estimates -- never missing, usually beating. But tomorrow's a new day, and a new fiscal year. Will it look as good as the last?

What analysts say:

  • Buy, sell, or waffle? Three analysts give II-VI one buy rating and a pair o' holds.
  • Revenue. On average, they're looking for 18% sales growth to $85.4 million.
  • Earnings. Profits are predicted to grow even more, up 34% to $0.43 per share.

What management says:
The big news at II-VI last quarter (even bigger than the raw numbers) was the sterling success of II-VI's "military and materials" division. There, core growth plus a well-timed acquisition of Pacific Rare Specialty Metals & Chemicals helped to increase both profits and new orders. Defense contractors are getting increasingly interested in lasers -- and with their collaborative Airborne Laser project making steady progress, I can see why Raytheon (NYSE:RTN), Northrop Grumman (NYSE:NOC), and Lockheed Martin (NYSE:LMT) at least, would be.

What management does:
That interest appears to be spurring a rise in profitability at II-VI, which has produced back-to-back quarters of increasingly strong gross and operating margins.

Margins

3/07

6/07

9/07

12/07

3/08

6/08

Gross

42.4%

42.5%

41.3%

40.9%

40.6%

41.2%

Operating

18.5%

19.2%

18.3%

18.6%

18.7%

19.5%

Net

7.2%

14.9%

14.6%

20.1%

20.1%

20.3%

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:
Above was all the good news we could handle in a single earnings release. However, the company was slow in including a cash flow statement with its news last quarter, eliciting a gentle chiding from yours Fool-y.

Well, the time for gentility is past. When II-VI finally included the cash flow statement as part of its 10-K filing, and the news arrived, it was not good. Operating cash flow rose a bare 3% in fiscal 2008. True, a decline in capital spending boosted free cash flow 12% -- but neither number was anywhere near what I expected based on the company's reported 69% "profits" growth under GAAP.

Suffice it to say that if II-VI fails to include a cash flow statement in tomorrow's release, I'll be considerably more skeptical as to the contents of the missing document this time around. You should be, too.

For more IV-I-I on II-VI, read:

Fool contributor Rich Smith owns shares of Boeing. II-VI used to be a Motley Fool Hidden Gems recommendation. The Fool has a disclosure policy.