AFOP results

Excellent results. Here are my notes.


Apr 2014 – Announced Mar quarter results

Record quarterly sales and profits. Guides up 31% for next quarter.

Revenues were $24.9 million, up 105% from $12.2 million, and up 14% from $21.8 million sequentially.

Adj Net income for the quarter ended March 31, 2014 rose to $6.4 million or 35 cents per share, up from 12 cents per share.

Adj gross margin was 41%, compared to 37% in the year ago quarter and to 40% sequentially.

Adj operating margin was 29%, compared to 17% in the year ago quarter and 27% sequentially.

We were able to deliver record quarterly revenue, which exceeded our previous guidance, during a normally slower season which includes the Chinese New Year holiday. In addition to the record quarterly revenue, we continued to improve our quarterly financial performance with record gross margin, operating margin and profits.

We are encouraged by the prospect of business growth in the coming years. We expect revenues in the coming quarter to be above $25 million, which will be a new record for quarterly sales and will represent a 31% increase from the year ago quarter.

Note that when asked whether “above $25 million” for next quarter meant 25 to 26, or 25 to 27, they said “No upper limit”.


Saul, thank you. Is it a buy at this price level? -M

Something I will never understand in investing. AFOP comes out with outstanding results and Mr. Market dumps the stock. What is it that I am not getting? If it’s not increased revenue or increased profits and increased guidance then what is the market looking for. I don’t get it.

Frustrated Gayle


I agree. Here is an opportunity to load up on some more shares!

long AFOP

Nice write up Saul and thanks,

Note that when asked whether “above $25 million” for next quarter meant 25 to 26, or 25 to 27, they said “No upper limit”.

So I have decided to add to my position since this is now a steaming locomotive in the right direction. I suffer from anchoring and have for as long as I have been investing but I’m trying to break the habit.

Can I ask how you decide whether to add more at this or that price? What criteria you use and when I say “YOU” I mean the collective you that populate this wonderful board? I often say I can add and subtract with the best of them but numbers have never given me a clear picture and hence, I must rely on guys that are good with numbers, until I figure out a way to do it myself…a beginner.

PS if you help me figure out this formula I promise to contribute more and take away less.

Can I ask how you decide whether to add more at this or that price?


I pay a lot of attention to PE ratio and rate of growth. With AFOP the rate of growth has been huge and PE ratio is well under 20. I added a tiny bit yesterday when price briefly was in the 17’s.

You have to take into consideration that the rate of growth has to slow down as the comparisons will get tougher. Also that it could slow down because of lack of demand sometime in the future, though for now that seems unlikely.

You should at least make a table like this of earnings:

2011: 06 08 09 05
2012: 06 08 12 10
2013: 12 27 34 29
2014: 35

For example, looking at this you can see that this quarter’s 35 cents almost tripled last year’s 12 cents, but the June earnings, even if they are 40 cents, will be compared with 27 cents the year before and thus up “only” 50%, etc.

Then create a list of trailing earnings:

12/11 - 28 cents
03/12 - 28
06/12 - 28
09/12 - 31
12/12 - 36
03/13 - 42
06/13 - 61
09/13 - 83
12/13 - 102
03/14 - 125

And if you can hand graph those trailing earnings on a piece of log graph paper, it gives you a great visual picture of the slope of growth. The ones going up steady, but with a gentle slope, should have lower PE ratios than the slopes that are going straight up. (AFOP was flat in early 2012, but now is going straight up. Bound to level off a bit, but still is a very good price for amount of growth).

Hope this helps



Hi Saul,

Thanks so much for this. I’m traveling on holiday right now and won’t be able to dig into it the meat you have so generously shared but when I do there’s two things I’m sure of:

First I will be a better investor due to you, and second, I’m sure I’ll have more questions.

You are the best.