March 28, 2008

FARO Is Attractively Valued

From Zacks:

FARO Technologies, Inc. is seeing strong demand for its products despite a tough economy. The stock has rebounded strongly from its lows in January, but is still attractively valued at a PEG ratio of 1.1. Earnings estimates for this year have risen nine cents to $1.50 over the past month. All three covering analysts have raised their guidance.

Full Analysis

FARO Technologies, Inc. (FARO), together with its subsidiaries, designs, develops, and manufactures software-based three-dimensional (3D) measurement devices for manufacturing, industrial, building construction, and forensic applications.

The company offers articulated electromechanical measuring devices, such as Faro Arm, a combination of six or seven-axis, instrumented articulated measurement arm, a computer, and software programs; Faro Scan Arm, which provides customers the ability to measure their products without touching them and offers a seven-axis contact/noncontact measurement device with integrated laser scanner; and Faro Gage, an accuracy version of the Faro Arm product.

In mid-February, the company reported strong fourth-quarter results that sailed past expectations. Net income for the fourth quarter was $8.4 million, or 50 cents per share, an increase of $4.7 million, compared to $3.7 million, or 25 cents per share, in the fourth quarter of 2006. Analysts expected 31 cents per share.

Sales for the fourth quarter of 2007 were $59.2 million, an increase of $15.3 million, or 34.9%, from $43.9 million in the fourth quarter of 2006. New order bookings for the fourth quarter of 2007 were $65.4 million, an increase of $15.6 million, or 31.3%, compared to $49.8 million in the year-ago quarter.

"Once again, the FARO team around the world demonstrated its ability to perform," stated Jay Freeland, FARO's President and CEO. "Sales growth for 2007 was above the target range of 20-25% that we have been communicating all year. As always, fourth quarter sales were particularly strong with all three regions growing more than 20%."

"2007 was a tremendous year for FARO combining significant growth with great productivity, several new products and fantastic execution. Although there is clearly increased economic pressure globally, particularly in the U.S., we continue to see strong demand for our products. As such, in 2008 we are maintaining our guidance ranges of approximately 20% - 25% top line growth and gross margin of 58% to 60%," Freeland concluded.

These results have allowed the stock to bounce strongly off of its January lows around $20. FARO has posted an average surprise of 34% over the past four quarters. Earnings estimates for this year have risen nine cents to $1.50 over the past month. All three covering analysts have raised their guidance. The stock is attractively valued at a PEG ratio of 1.1x.

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