FORM

FormFactor makes semiconductor test and measurement products (probe cards, etc.), a real and strategically important niche leveraged to advanced-node and AI/HBM testing. The balance sheet is pristine — $1.04B equity against just $189M total liabilities (0.18x), only $11.1M long-term debt — and the company is solidly profitable with $115M of operating cash flow. That quality is not in dispute.

The problem is the disconnect between the modest fundamentals and an extreme valuation. FY2025 revenue grew only 2.8% to $785M and net income actually fell 21.9% to $54.4M, with diluted EPS down 22.5% to $0.69. Margins are thin for the multiple — 39.3% gross, 7.3% operating, 6.9% net — and ROE is just 5.3%. Revenue has essentially gone sideways for five years ($770M in FY2021 to $785M in FY2025), and earnings have been choppy ($83.9M, $50.7M, $82.4M, $69.6M, $54.4M). Cash also dropped 45.8% to $103M as capex surged 169.7% to $104M.