Back in August, the share price of Credence Systems (NASDAQ:CMOS) was languishing at $1.80. But, since then, it's been a thrill ride, as the stock price hit $4.96 on Friday (a day on which the stock surged $1.01). Basically, the company has pulled off a strong comeback; however, the valuation is now frothy.
In the fiscal fourth-quarter earnings report, revenues were $121.9 million, which was a $300,000 increase from the same period a year ago. During this time, the net loss fell from $22.5 million or $0.23 per share to a loss of $1.9 million or $0.02 per share.
Credence also announced that Lavi Lev is the new CEO. He has more than 20 years in the semiconductor industry, having worked at companies such as Cadence Design (NASDAQ:CDNS), Intel (NASDAQ:INTC), and Sun Microsystems (NASDAQ:SUNW).
Essentially, Credence develops testing systems for semiconductors. The technologies help with such things as failure analysis, engineering validation, yield optimization, and other diagnostics. Benefits include faster speed-to-market, less cost, and higher quality.
However, Credence has been in the midst of a major restructuring. The company has reduced headcount, written off inventory, and put in place more efficient processes. There was also a massive $474.4 million write-down of goodwill (which is an asset that is booked because of high-priced acquisitions).
Going into 2007, there are some positive factors that should help boost demand. After all, Microsoft (NASDAQ:MSFT) will launch Vista, which should propel PC sales. Also, there should be continued growth in mobile devices.
Guidance for the fiscal first quarter is for revenues of $118 million to $122 million and net income of breakeven to $0.02 per share. In other words, it does appear that the company is crossing over into profitability.
No doubt, Credence is in a much better position, in terms of product demand and its cost structure. But the fact remains that Wall Street has quickly factored this into the stock.
Now, it's a matter of the business demonstrating that it can generate sustained growth. But looking back at the company's history, this has been very tough because of the intense competition and volatility of the semiconductor industry. Buyers beware.
For related Foolishness:
- Foolish Forecast: Should You Believe in Credence?
- Foolish Forecast: Will Credence Clear Water?
- Fool Fight: AMD vs. Intel
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Fool contributor Tom Taulli does not own shares of companies mentioned in this article. He is currently ranked 327 out of 16,362 in Motley Fool CAPS, our new stock-rating community that you can join for free.
