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Applied Optoelectronics (AAOI) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

Applied Optoelectronics (AAOI) closed at $15.88 in the latest trading session, marking a +0.35% move from the prior day. This change outpaced the S&P 500's 0.07% gain on the day. At the same time, the Dow lost 0.25%, and the tech-heavy Nasdaq gained 0.14%.

Prior to today's trading, shares of the maker of fiber optic products used by cable TV providers had lost 2.74% over the past month. This has lagged the Computer and Technology sector's gain of 7.83% and the S&P 500's gain of 6.28% in that time.

AAOI will be looking to display strength as it nears its next earnings release, which is expected to be February 21, 2019. In that report, analysts expect AAOI to post earnings of -$0.04 per share. This would mark a year-over-year decline of 104.49%. Our most recent consensus estimate is calling for quarterly revenue of $60.78 million, down 23.9% from the year-ago period.

Any recent changes to analyst estimates for AAOI should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. AAOI is currently sporting a Zacks Rank of #2 (Buy).

Looking at its valuation, AAOI is holding a Forward P/E ratio of 11.59. For comparison, its industry has an average Forward P/E of 15.47, which means AAOI is trading at a discount to the group.

We can also see that AAOI currently has a PEG ratio of 0.77. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Electronics - Semiconductors industry currently had an average PEG ratio of 1.22 as of yesterday's close.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 155, putting it in the bottom 40% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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