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Aggressive Growth

Oplink Communications Inc. (OPLK - Snapshot Report) has posted an average earnings surprise of 113.5% over the past four quarters, most recently delivering a beat of 160% in its fourth quarter of 2012. This optical networking solutions provider achieved a Zacks #1 Rank (Strong Buy) on September 1.

Oplink Tops in Q4

On August 16, 2012, Oplink Communications reported fourth quarter 2012 earnings of 13 cents per share, well above the Zacks Consensus Estimate of 5 cents. Revenue increased 1.3% year over year to $44.2 million, in line with the Zacks Consensus Estimate.

However, operating profit declined 3.9% year over year to $3.4 million, primarily due to higher sales & marketing expense (up 9.6%) and general & administrative expense (up 7.6%).

Oplink Communications provided a stable outlook for the upcoming first quarter of 2013. Revenue is expected between $43.0 million and $46.0 million. Earnings are seen at 16 cents to 22 cents per share.

Operating expenses are expected to increase in the first quarter due to higher research & development spending and sales & marketing activity.

Earnings Estimates Move Higher

Earnings estimates moved higher over the last 30 days. For 2013, the Zacks Consensus Estimate jumped 24.4% to 56 cents, representing a 94.3% year-over-year growth. For 2014, the Zacks Consensus Estimate stands at 81 cents, reflecting year-over-year growth of 42.9%.

Reasonable Valuation

Currently, Oplink Communications is trading at a premium to most of its peers based on P/E and P/S. Its price to book ratio of 1.13 is at a discount to the peer group median of 1.62. Given the strong earnings growth prospects over the next couple of years, the stock is reasonably valued.

Incorporated in 2000, Oplink Communications provides optical networking solutions. The company has more than 350 products that cater to all segments of fiber optic network infrastructure, including long-haul networks, metropolitan area networks ("MANs"), local area networks ("LANs"), wireless backhaul and fiber-to-the-home ("FTTH") networks.

Fremont, California-based Oplink Communications has a market cap of $311.51 million. The company has a clientele of more than 525 companies globally, which includes customers from telecommunications, data communications and cable TV equipment verticals. It competes with a number of companies, including Avago Technologies (AVGO) and JDS Uniphase Corp. (JDSU).

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