Oclaro Inc (NASDAQ:OCLR), the leading small-cap provider and innovator of optical communications solutions, has beaten revenue and earnings estimates by $0.5 million and $0.02 per share, respectively. Its stock price soared more than 20% after beating the consensus estimates.

However, trading around $6 a share, OCLR share price is substantially lower from the 52-week high of $11.30. The stock was under pressure in the last three months, due to bleak fundamentals.

Oclaro Financial Numbers Are Declining

Investors have cheered the profitability and cost-cutting despite lower revenues.  In Q2, its revenues of $139 million declined year over year and sequentially. Oclaro had generated revenues of $155.6 million in Q1, and revenues of $153.9 million in the same period last year.

“The December quarter results were in line with our expectations. While revenue declined from the prior quarter, the team again delivered strong gross margin, profitability and cash flow,” said Greg Dougherty, Chief Executive Officer of Oclaro.

Moreover, the company’s revenues are likely to decline in the third quarter this year. It expects to generate revenue in the range of $120 million to $128 million, lower from the previous quarters of fiscal 2018. Operating income in the third quarter likely to stand around $13 million to $17 million, down from operating income of $24 million in the previous quarter.

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Valuations are Attractive, but Financials Could Weigh on Stock Price

Its valuations appear eye-catching. Oclaro stock trades around 1.67 times to sales and 6.54 times to earnings, down from the industry average of 2.25 and 23 times, respectively. The company expects to generate lower financial numbers in the next quarter. Market analysts always see lower financial numbers as a bad sign for the stock price and valuations.

The CEO said, “While we project March quarter revenue to be down sequentially, we anticipate another quarter of solid operating income. As the headwinds facing the industry begin to subside, and we ramp new products, our revenue is expected to resume growth in the June quarter.”

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