Buffett Brain · Research note
Score updated 29 Oct 2026
AAOI· Technology
Applied Optoelectronics
Applied Optoelectronics' negative margins and ROIC indicate a lack of competitive moat and financial stability.
Buffett fit
Weak fit
Owner
11
Durability
38
Management
49
Price
55
Score updated 29 Oct 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
Owning 100% of Applied Optoelectronics would involve managing a business with negative yield of -2.96% and a concerning net debt/EBITDA ratio of 16.02.
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The company's negative profitability metrics, such as a 5-year average of -19.66%, highlight a lack of durability.
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Management has not demonstrated effective , as evidenced by a share count CAGR of 22.29% without corresponding or dividends.
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The current valuation metrics, like a of -261.1 and EV/ of -213.8, do not provide a .
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- The full reasoning behind all four pillars
- The 5-year price target and the return it implies
- What would change the call
- Graham, Lynch and Greenblatt on the same stock
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For and against
The strongest points on each side, with the numbers behind them.
In its favor
3- 1Revenue CAGR of 21.15% indicates growth potential in sales.
- 2Current ratio of 3.83 suggests short-term financial stability.
- 3Debt/Equity ratio of 0.16 indicates low relative to equity.
Concerns
7- 1Negative of -3.71% reflects poor return on invested capital.
- 2 of -11.57% indicates ongoing operational losses.
- 3Net margin of -8.55% highlights inability to generate profit.
- 4High net debt/EBITDA ratio of 16.02 suggests potential liquidity issues.
Price history
$79.19+1,251.4%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Applied Optoelectronics designs and manufactures fiber-optic networking products, serving data centers and telecom operators. Its revenue is driven by sales of optical modules and lasers. However, with a of 29.64%, the business struggles to achieve profitability. The unit economics are weak, as evidenced by a negative of -11.57%.
How this analysis has moved
The call has held across 6 reviews.
Sep 27, 2026 → Oct 29, 2026
What other investors would say
The same company, judged by three other documented playbooks.
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