Why FARO Tech Shares Surged


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of three-dimensional measurement technologist FARO Technologies climbed 16% today after its quarterly results topped Wall Street expectations.

So what: The stock has been slammed over the past year on a string of disappointing quarters, but better-than-expected fourth-quarter results -- EPS of $0.46 on revenue of $80.7 million versus Wall Street's view of $0.31 and $68.0 million, respectively -- are forcing analysts to increase their valuation estimates.Although revenue was flatand margins shrank over the year-ago period, the slowing rate of decline gives investors some optimism that the worst is behind it.

Now what: I'd continue to be cautious about buying into FARO. "In 2013, we anticipate continuing market uncertainty," said President and CEO Jay Freeland. "To address this and drive improved performance, we expect to continue to strengthen our product portfolio, increase sales coverage around the world, and tighten cost controls across the Company's operations." But with the stock up about 30% from its 52-week lows and trading at a 20-plus forward P/E, investors might now be expecting too much of an improvement in too short of a time period.

Interested in more info FARO? Add it to your watchlist.

2013 and beyond
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

The article Why FARO Tech Shares Surged originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.