A Refocused FARO Is Looking To Drive Better Results From Its Strong Metrology Capabilities

FARO Technologies (NASDAQ:FARO) gets included in discussions of those companies that could benefit as industrial end-markets become more automated, but the path hasn't been smooth so far. Although FARO has stronger share in industrial metrology products like arms and trackers, and has done well with its market entry into 3D scanners, the share price performance over the last five years has been poor (down more than 20%) while Perceptron (NASDAQ:PRCP), Hexagon (OTCPK:HXGBY)(HEXAb.ST), and Cognex (NASDAQ:CGNX) have done considerably better. This isn't entirely unfair either, as the company's revenue growth has been lackluster (less than 4%) and operating margins have weakened.

The company's interim CEO (and co-founder) has been shaking up FARO's operating plan, with a new focus on six primary verticals and improved expense leverage. I am concerned about the growth that management can expect from the auto and aerospace end-markets, but I believe there are worthwhile opportunities in other industrial metrology markets, as well as 3D scanning. I believe the market is currently pricing in around 10% long-term FCF growth, which seems reasonable, but this is a name worth keeping an eye on, as the shares can be volatile around earnings reports.

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A Refocused FARO Is Looking To Drive Better Results From Its Strong Metrology Capabilities