Advanced Energy also breaks out the revenue for its most important segments, Semiconductor Equipment and Industrial and Medical Equipment, which are 54.9% and 15.9% of revenue. Over the last two years, Advanced Energy’s Semiconductor Equipment revenue (i.e., plasma power) averaged 2.8% year-on-year declines while its Industrial and Medical Equipment revenue (i.e., robotics) averaged 18.3% declines.

This quarter, Advanced Energy reported robust year-on-year revenue growth of 23.6%, and its $404.6 million of revenue topped Wall Street estimates by 3.7%. Company management is currently guiding for a 15.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 5.6% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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Operating Margin

Advanced Energy has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9%, higher than the broader industrials sector.

Looking at the trend in its profitability, Advanced Energy’s operating margin decreased by 9.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, Advanced Energy generated an operating profit margin of 7.6%, up 7.4 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Advanced Energy’s decent 9.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Advanced Energy’s two-year annual EPS declines of 18.2% were bad and lower than its two-year revenue performance.

In Q1, Advanced Energy reported EPS at $1.23, up from $0.58 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Advanced Energy’s full-year EPS of $4.35 to grow 15.1%.

Key Takeaways from Advanced Energy’s Q1 Results

We were impressed by Advanced Energy’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid quarter. The stock traded up 4.5% to $101.96 immediately after reporting.

Advanced Energy put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free .