nLIGHT Soars 58% in 3 Months: Is the Stock Still Worth Buying?

Core Insights - nLIGHT (LASR) shares have increased by 58.2% over the past three months, significantly outperforming the Zacks Electronics - Semiconductors industry's growth of 19.9% [1][2] - The company's strong second-quarter results for 2025, along with positive forward guidance and growth in the Aerospace and Defense (A&D) segment, have boosted investor confidence in its long-term prospects [1][5] Financial Performance - nLIGHT's second-quarter 2025 revenues rose by 22% year over year to $61.7 million, exceeding the Zacks Consensus Estimate of $55 million [5] - The company reported a non-GAAP EPS of 6 cents, a notable improvement from a loss of 10 cents in the same quarter last year, and better than the consensus estimate of a loss of 9 cents [5][9] - A&D end market revenues reached a record $40.7 million, up 49% year over year, now constituting 66% of total sales compared to 54% a year ago [6][9] A&D Segment Growth - The A&D segment is identified as the primary growth driver, with defense product revenues growing by 74.5% year over year, supported by shipments into the HELSI-2 program [8][10] - The HELSI-2 program is a $171 million U.S. DoD contract aimed at developing a 1-megawatt high-energy laser by 2026, indicating strong future revenue potential [8] - Management has raised its full-year A&D growth outlook to at least 40%, up from 25% previously, reflecting confidence in ongoing demand [10] Margin Improvement - nLIGHT's product gross margin improved to 38.5%, up from 30.3% a year ago, driven by a defense-heavy sales mix [13][14] - Factors contributing to margin growth include higher shipment volumes, a favorable business mix, and effective manufacturing execution [14] - For the third quarter, management has guided product gross margin to be in the range of 32-36%, indicating a more cautious outlook [15] Valuation Metrics - nLIGHT is currently trading at a forward 12-month price-to-sales (P/S) ratio of 5.97X, which is lower than the industry average of 9.01X [16][18] - Compared to peers like Broadcom, Ambarella, and Allegro MicroSystems, nLIGHT's P/S multiple is also lower, suggesting a potentially undervalued position [18] Investment Recommendation - The combination of record A&D revenues, margin improvements, and discounted valuation positions nLIGHT as a compelling investment opportunity [19] - Successful execution on key defense programs will be crucial for achieving the projected 40% growth in A&D revenues this year [19]