It's been six months since last I checked up on FormFactor (Nasdaq: FORM) in depth. Has anything changed?

In October, CEO Tom St. Dennis was brand new to the job but already bold enough to set some ambitious goals. By mid-2011, the maker of semiconductor testing tools should be able to show:

  • $65 million in quarterly revenue, up from $47 million in the third quarter of 2010.
  • Operating expenses under $20 million, down from $29 million.
  • Break-even non-GAAP earnings, up from a negative $0.55 per diluted share.
  • Positive free cash flow, or break-even at $50 million in revenue -- up from a negative $28.5 million.

Do that, and FormFactor should be in great shape for a long and healthy future.

We're not quite at the middle of 2011 yet, but here's where the company stands as of the just-reported first quarter:

  • $40.4 million in sales, up 2% year-over-year.
  • $20.8 million of non-GAAP operating expenses.
  • Adjusted net loss: $0.32 per share.
  • ... and no official word yet on FormFactor's first-quarter cash flows, but the company burned $14 million of cash, including $2 million spent on share buybacks. Given FormFactor's uncomplicated cash flow situation, that probably means $12 million of negative free cash flows.

So there's good progress being made, though some of the targets remain out of reach by that second-quarter deadline.

The cost controls are happening ahead of schedule, and the company was putting together a fine string of double-digit revenue gains before disaster struck Japan, which happens to be a major market for FormFactor.

Management expects sales between $42 million and $46 million in the second quarter along with operating costs tucking in below the $20 million mark, which means hitting two out of four mid-year targets. Under the circumstances, that's not half bad.

FormFactor is doing a very good job on what it can control. But despite the marked improvements so far, the stock has largely moved sideways alongside sector peers Cohu (Nasdaq: COHU) and Advantest (NYSE: ATE), and it's far below the 60% six-month gains of larger semiconductor equipment peer Teradyne (NYSE: TER). I don't think that's fair.

I liked the early gumption St. Dennis showed two quarters ago, I like the improvements he's making to the company, and I totally get why FormFactor is a five-star CAPS stock today. This turnaround story is on track. I'm off to slap an "outperform" label on this stock right now, and you can follow along by clicking here.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. FormFactor is a Motley Fool Hidden Gems choice. The Fool owns shares of FormFactor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.