3 Reasons to Sell LASR and 1 Stock to Buy Instead

April 24, 2025 at 05:01 AM EDT

LASR Cover Image

Shareholders of nLIGHT would probably like to forget the past six months even happened. The stock dropped 35.8% and now trades at $6.61. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in nLIGHT, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Even with the cheaper entry price, we're cautious about nLIGHT. Here are three reasons why you should be careful with LASR and a stock we'd rather own.

Why Do We Think nLIGHT Will Underperform?

Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, nLIGHT’s 2.4% annualized revenue growth over the last five years was sluggish. This was below our standards. nLIGHT Quarterly Revenue

2. Cash Burn Ignites Concerns

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

nLIGHT’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 6.4%, meaning it lit $6.39 of cash on fire for every $100 in revenue.

nLIGHT Trailing 12-Month Free Cash Flow Margin

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, nLIGHT’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

nLIGHT Trailing 12-Month Return On Invested Capital

Final Judgment

We see the value of companies helping their customers, but in the case of nLIGHT, we’re out. Following the recent decline, the stock trades at $6.61 per share (or 1.7× forward price-to-sales). The market typically values companies like nLIGHT based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d suggest looking at one of our all-time favorite software stocks.

Stocks We Like More Than nLIGHT

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

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Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.