Rubicon Technology has Investors Seeing Double
Phillip is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
After Rubicon Technology INC (NASDAQ: RBCN) came off its second-quarter report on Aug. 2, many expected the stock to take off. After all, the company posted a 67% increase from its previous quarter. But the days ahead would prove anything but bullish for this optical technology stock.
Why, you ask? Well, as many Foolish investors know, determining the quality of a stock isn't based entirely on the latest quarterly report, and this is why Rubicon suffered a substantial blow in the days ahead.
Despite the quarter-to-quarter upswing, revenue in the first two quarters at Rubicon declined dramatically from the previous year, and the reported GAAP earning per share sank to a loss. Not to mention contracting margins all over the books, which scream of stock instability.
Rubicon reported its earnings after the closing jingle on Aug. 2, when it was valued at $10.62 per share, but during the next day, the stock would sink to a low of $9.03 before closing at $9.26, representing a 13.5 per cent decline. As the stock's owners saw the numbers roll in, their eyes likely lit up, but then their stomachs sank along with the stock.
So even though Rubicon posted a 67% increase in revenue from the previous quarter, not to mention beating by over 5% what 12 analysts on the S&P 500 Capital IQ expected, the company's foundation has been wobbling since the new year.
The stock fell even though earnings per share beat expectations by $0.06. The S&P 500 Capital IQ anticipated a -$0.12 per share loss instead of the -$0.06 that it actually suffered. But a loss is a loss, and the titanium ship that the company was on in 2011 is sinking fast this year.
Lesson learned for those investors who decided to purchase more of the doomed stock when they heard the first opening bell after the report. This is why it is so important to take a look at the previous year's performance, and an astute investor will look back further. The most flashy and appealing news in a company's report will come first, but the market will almost always react to information that is found by digging deeper.
Still, I don't think it's quite time to rule this stock out. The next quarter's estimates are for a $0.01 earnings per share, which represents and increase of $0.07 from the previous quarter. It's best to hold on for the time being.
But before deciding, you should take a look at how a few of Rubicon's competitors are doing this year. The Technology sector has risen 13.7% this year, while the S&P500 is up about 15%. So far in 2012, Rubicon is up nearly 5%, despite its recent poor performance. These are some of the companies to analyze for anyone looking to sell Rubicon, but wants to stick with a technology stock.
Aixtron (NASDAQ: AIXG) is up nearly 15% to date. However, weak growth in EPS indicates you may want to stick with Rubicon over this stock. SemiLEDs Corporation is down about 34%. It expects in the third quarter a GAAP net loss of between $7.5 and $7 million, not to mention the stock is selling at just over $2 per share, making it a risky investment to those who want to avoid penny stocks. Sticking with Rubicon over this one is a sure bet. Universal Display (NASDAQ: PANL) is up about 6.3% and expects fiscal 2012 revenues to range between $90 and $100 million. The company has managed to pull its first profit since 2008 and might be ready to surge. Investors should keep an eye on this one and they may even want to sell Rubicon to pick up some shares. Veeco Instruments (NASDAQ: VECO) is up about 82% and expects revenue in the second quarter, it's next earnings, to be between $120 million and $145 million. This continues its massive growth since 2009 and would be my top pick over Rubicon.
Looking at Rubicon's financials gives any of the stock's owners an uneasy feeling. With the company being such a mixed bag, it might be time to get out if the Foolish investor can find something else in which to put their money.
But it's difficult to deny the growth the company has experienced since 2009, when the firm earned $20 million in revenue and $30 million in operating expenses, to what it was in 2011 when it posted $134 million in revenue and just $79 million in operating expenses. However, looking at the first two months of this year - with $10 million in revenue and $17 million in operating expenses in the first quarter, and $17 million in revenue and $16.9 million in expenses in the second - an investor can't help but be discouraged.
PhiWoo has no positions in the stocks mentioned above. The Motley Fool owns shares of Universal Display. Motley Fool newsletter services recommend Universal Display . 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.If you have questions about this post or the Fool’s blog network, click here for information.