Coherent (COHR): Evaluating Valuation After Strong Growth and Upbeat Guidance

Coherent (COHR) just posted impressive quarterly numbers with strong year-over-year gains in both sales and net income. The stock is also seeing interest after management issued an upbeat revenue outlook for next quarter.

See our latest analysis for Coherent.

After a stretch of product launches, upbeat guidance, and meaningful M&A activity, Coherent’s momentum has really caught investor attention. The stock’s one-month share price return stands at an impressive 36.1%, and its total shareholder return over the past year is a robust 52.5%. With a three-year total return above 315%, it is clear confidence is building around both near-term growth and the company’s bigger-picture transformation.

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Despite the remarkable rally in Coherent’s shares and a stream of upbeat news, the key question remains: are investors underestimating its true potential, or is all that future growth already reflected in the stock’s price?

Most Popular Narrative: 2.9% Undervalued

Coherent’s widely followed narrative sees the fair value at $161 per share, just above its last close of $156.67. A tight margin sets the stage for debate on whether the company’s expanding role in AI and manufacturing is the real deal for sustained outperformance.

The ongoing expansion of AI datacenter infrastructure and high-performance computing is propelling structural growth in demand for advanced optical transceivers (800G, 1.6T, and beyond), optical circuit switches, and related photonics components. This is fueling robust sequential order growth and sustained revenue momentum in Coherent's datacom and communications business.

Read the complete narrative.

Want to uncover the bold forecasts holding up this valuation? The narrative leans on big jumps in revenue and a leap in profit margins and bakes in a future earnings multiple that turns heads. What rapid changes are embedded in these assumptions? Dig deeper to get the full story.

Result: Fair Value of $161 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising competition from Asian manufacturers and unpredictable demand in certain industrial markets could quickly challenge Coherent’s positive outlook and future earnings trajectory.

Find out about the key risks to this Coherent narrative.

Another View: SWS DCF Model Offers a Cautious Perspective

While the most popular narrative points to undervaluation, our SWS DCF model tells a different story. According to this method, Coherent’s shares are actually trading above their fair value estimate of $139.24. This suggests recent optimism might be priced in, at least from a cash flow perspective. Could the market be running ahead of fundamentals?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Coherent for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 883 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Coherent Narrative

If you have your own angle or want a hands-on look at the numbers, you can build your own view in just a few minutes. Do it your way

A great starting point for your Coherent research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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