Faro Technologies (FARO) AI Stock Analysis

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Faro Technologies

(NASDAQ:FARO)

49Neutral

Faro Technologies scores a 49, reflecting a challenging financial performance with declining revenues and net losses, but improvements in cash flow management. Technical indicators suggest a bearish trend, and valuation metrics are unattractive due to unprofitability. However, the company shows potential for recovery with strategic initiatives and product launches, as discussed in the earnings call.

Positive Factors

Financial Performance

FARO closed out 2025 on a solid note, with a better Q4 top-line performance and stronger than expected margins, resulting in a healthy EPS beat.

Growth Strategy

FARO is taking important steps to drive growth, including securing two new OEM/distribution agreements and new product introductions.

Partnership Strategy

FARO's new approach to partnerships could be a solid tailwind, as management noted it believes it can reach a significantly higher number of customers through a more aggressive partnership strategy.

Negative Factors

Market Conditions

FARO continues to execute well in a challenging macro environment, delivering better-than-expected Q3 results.

Revenue Expectations

Q4 revenue guidance at the midpoint was in line with consensus, while NG EPS was significantly better than expectations.

Faro Technologies (FARO) vs. S&P 500 (SPY)

Market Cap

$488.24M

Dividend YieldN/A

Average Volume (3M)259.33K

Price to Earnings (P/E)―

Beta (1Y)2.44

Revenue Growth-4.57%

EPS Growth84.12%

CountryUS

Employees1,181

SectorTechnology

Sector Strength51

IndustryHardware, Equipment & Parts

Share Statistics

EPS (TTM)-0.47

Shares Outstanding19,225,838

10 Day Avg. Volume273,117

30 Day Avg. Volume259,330

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.56

Price to Cash Flow (P/CF)7.80

P/FCF Ratio7.90

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$37.00

Price Target Upside45.67% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Faro Technologies Business Overview & Revenue Model

Company DescriptionFaro Technologies, Inc. (FARO) is a leading global provider of 3D measurement, imaging, and realization technologies. The company operates primarily in the fields of manufacturing, construction, and public safety, offering an array of innovative products such as laser scanners, coordinate measuring machines, and 3D imaging tools. FARO's solutions are widely utilized across various industries for applications like quality assurance, inspection, and reverse engineering, enabling users to capture, analyze, and realize complex 3D data.

How the Company Makes MoneyFaro Technologies generates revenue through the sale of its advanced 3D measurement and imaging products, as well as through accompanying software solutions that enhance the functionality of its hardware offerings. The company also earns income by providing services such as training, maintenance, and support to its clients. Key revenue streams include direct sales to end-users in industries like aerospace, automotive, and architecture, as well as through partnerships with distributors and resellers. FARO's revenue is further supported by long-term service contracts and software licensing agreements that ensure recurring income. Additionally, the company benefits from strategic collaborations with technology and industry leaders, which help expand its market reach and drive sales growth.

Faro Technologies Financial Statement Overview

Summary

Faro Technologies faces challenges with declining revenues and persistent net losses, impacting profitability metrics negatively. Despite these hurdles, the company has managed to stabilize its cash position and improve free cash flow, which is a positive sign for future operations. Continued focus on cost control and revenue growth is essential to improve financial health.

Income Statement

Neutral

Faro Technologies has shown a declining revenue trend from 2019 to 2024, with a notable revenue drop from 2023 to 2024. The company has struggled to maintain consistent profitability, indicated by negative net incomes in recent years. Despite this, the gross profit margin improved in 2024, suggesting cost control measures may be gaining traction. However, EBIT and EBITDA margins remain weak, highlighting ongoing operational challenges.

Balance Sheet

Neutral

The company's debt-to-equity ratio remains moderate, but the declining equity ratio suggests a weakening asset base relative to liabilities. Return on Equity (ROE) is negative due to consecutive net losses, which reflects poorly on the company's ability to generate returns for shareholders. Nonetheless, the company's cash reserves have been relatively stable, providing some financial cushion.

Cash Flow

Neutral

Faro Technologies has shown improvement in cash flow management, with positive operating cash flow in 2024 compared to previous years. Free cash flow turned positive in 2024, indicating better cash generation after capital expenditures. The operating cash flow to net income ratio is strong, signaling effective cash conversion from operations.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
342.43M	358.83M	345.76M	337.81M	303.77M
	Gross Profit
187.15M	165.00M	175.76M	183.93M	159.85M
	EBIT
3.33M	-49.54M	-20.31M	-1.14M	-14.88M
	EBITDA
3.33M	-35.23M	-7.55M	5.18M	-16.23M
	Net Income Common Stockholders
-9.07M	-56.58M	-26.76M	-39.96M	629.00K
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
98.70M	96.28M	37.81M	121.99M	185.63M
	Total Assets
483.00M	504.69M	473.35M	479.74M	525.59M
	Total Debt
88.80M	89.03M	20.36M	24.39M	27.97M
	Net Debt
94.00K	12.24M	-17.45M	-97.60M	-157.67M
	Total Liabilities
233.40M	236.09M	162.30M	153.28M	165.29M
	Stockholders Equity
249.61M	268.61M	311.05M	326.46M	360.30M
Cash Flow		Free Cash Flow
24.79M	-12.92M	-41.79M	-25.42M	15.32M
	Operating Cash Flow
30.63M	1.07M	-24.86M	-13.48M	21.39M
	Investing Cash Flow
-3.19M	-33.49M	-49.90M	-45.74M	13.91M
	Financing Cash Flow
-12.85M	71.28M	-997.00K	1.58M	11.06M

Faro Technologies Technical Analysis

Technical Analysis Sentiment

Negative

Last Price25.40

Price Trends

50DMA

28.68

Negative

100DMA

28.05

Negative

200DMA

22.91

Positive

Market Momentum

MACD

-0.50

Positive

RSI

42.24

Neutral

STOCH

21.09

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FARO, the sentiment is Negative. The current price of 25.4 is below the 20-day moving average (MA) of 27.06, below the 50-day MA of 28.68, and above the 200-day MA of 22.91, indicating a neutral trend. The MACD of -0.50 indicates Positive momentum. The RSI at 42.24 is Neutral, neither overbought nor oversold. The STOCH value of 21.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FARO.

Faro Technologies Risk Analysis

Faro Technologies disclosed 42 risk factors in its most recent earnings report. Faro Technologies reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Faro Technologies Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LYTS	71 Outperform	$477.84M	20.81	11.40%	1.23%	10.45%	-15.98%
ALNT	66 Neutral	$354.22M	26.36	5.10%	0.57%	-8.41%	-47.10%
Sector *	57 Neutral	$19.95B	9.66	-12.05%	2.76%	5.40%	-24.89%
OUST	56 Neutral	$379.05M	―	-53.83%	―	33.41%	81.07%
FARO	49 Neutral	$488.24M	―	-3.50%	―	-4.57%	84.12%
MVIS	49 Neutral	$298.91M	―	-134.07%	―	-35.31%	-2.18%
KULR	46 Neutral	$344.11M	―	-63.44%	―	9.23%	51.61%

* Technology Sector Average

Performance Comparison

FARO

Faro Technologies

25.40

6.05

31.27%

ALNT

Allient

20.90

-10.04

-32.45%

LYTS

Lsi Industries

16.23

2.22

15.85%

MVIS

Microvision

1.22

-0.28

-18.67%

KULR

KULR Technology Group

1.22

0.64

110.34%

OUST

Ouster

7.05

-0.58

-7.60%

Faro Technologies Earnings Call Summary

Earnings Call Date: Feb 24, 2025 | % Change Since: -6.17% | Next Earnings Date: Apr 30, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with significant achievements in financial performance, product launches, and strategic partnerships. However, these positives were offset by declines in revenue and geographical challenges, particularly in Asia. Overall, the sentiment is cautious optimism, with a strong belief in growth potential despite current market headwinds.

Highlights

Exceeded Financial Targets

Revenue was $93.5 million, above the midpoint of the guidance range. Non-GAAP gross margin expanded over 600 basis points year over year to 57.4%, and non-GAAP operating expenses were below the targeted range.

Record-High EBITDA and Cash Flow

Adjusted EBITDA was $16.7 million or 17.9% of sales, the highest single quarter in over a decade. Operating cash flow was $17.3 million, marking the fifth straight quarter of cash flow generation.

Successful Product Launches

Launched new products including FARO Arm Quantum X, Focus Premium Laser Scanner, and ORBIS Premium Mobile Scanner. Additionally, the FARO LEAP ST handheld scanner was introduced, marking entry into a new market segment.

Significant Partnerships

Signed multiyear partnership agreements with Topcon and a leading metrology company, expected to add over 200 new channel partners and 1,000 sellers of FARO technologies, tripling the sales force.

Improved Long-term Financial Goals

Updated long-term goals with higher gross margin targets and increased EBITDA and free cash flow aspirations due to operational improvements.

Lowlights

Revenue Decline

Fourth quarter revenue of $93.5 million was down 5% year over year. Hardware revenue decreased by 7%, software revenue by 5%, and service revenue by 2%.

Geographical Weakness

Significant revenue decline in Asia Pacific by over 11% due to continued weakness in China.

FX Headwinds

Adverse impact of a stronger U.S. Dollar, reducing revenue by $2 million and negatively affecting gross margins and EPS.

Cautious Market Outlook

Continued challenges in commercial construction, especially in China and Germany, with a cautious outlook due to macroeconomic uncertainties.

Company Guidance

In the fourth quarter of 2024, FARO Technologies, Inc. reported revenue of $93.5 million, surpassing the midpoint of their guidance range, with a non-GAAP gross margin of 57.4%, expanding by over 600 basis points year over year. Non-GAAP operating expenses were $39.9 million, below the targeted range of $40 million to $43 million per quarter. The company achieved $0.50 in non-GAAP EPS, marking the seventh consecutive quarter of beating expectations, and recorded an adjusted EBITDA of $16.7 million, or 17.9% of sales, the highest in over a decade. FARO's operating cash flow was $17.3 million, representing the fifth consecutive quarter of positive cash flow. Despite facing FX headwinds, which affected revenue by approximately $2 million, the company maintained its strong performance. For the full year, non-GAAP gross margins grew by 850 basis points to 55.2%, and FARO achieved double-digit EBITDA margins for the first time since 2018. Looking forward, the company plans to drive organic growth through refreshing core solutions, expanding addressable opportunities, and forming strategic partnerships, with an expectation of overcoming broader market challenges in 2025.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.