The analysis below illustrates why Orbotech (NasdaqGS: ORBK) no longer has big upside potential prior to reporting earnings next week.

Earnings Expected Thursday

Orbotech is expected to report earnings on Valentines Day, February 14th before the market opens. On August 3rd of last year, we explained why Orbotech could trade much higher following its Q2’17 earnings announcement and the stock has since increased by 39%. Shares are now up an enormous 221% over the last three years.

So with Orbotech’s stock sky-rocketing, what can investors expect when management reports earnings next Wednesday? The table below highlights the company’s estimated vs actual earnings over the last nine quarters and stock price impact immediately following the announcement.

Orbotech effectively missed its sales and earnings estimate only once over the prior nine quarters and the stock took a 9.5% hit.

Wall Street is expecting Q4’17 sales of $256 million (+19.1% YoY) and net income of $42 million (+25.1% YoY). The company has only grown its top-line by more than 15% once (Q3’17) in the prior nine quarters. Could the company be leaving itself open for a miss?

Investors should expect a fairly sizable move when the company reports on Valentine’s day at the very least. On average, shares of Orbotech have increased 3.6% immediately following its earnings announcement.

However, shares now have more downside than upside after the stocks recent gains.

Quality Outlook Priced Into Valuation

Orbotech is based in Israel, but operates globally, selling products that enhance the yield of semiconductor manufacturing processes. These solutions help manufacturers eliminate waste and improve margins. Semiconductor manufacturers have been investing heavily in capacity over the past few years, but as that capacity comes online, prices will begin to come under pressure. These manufacturers will be looking for opportunities to increase their margins, and this is exactly why Orbotech is well positioned right now.