ValuentumAd

Official PayPal Seal

Best-Idea EDAC Tech Reported Strong Third-Quarter Performance

publication date: Oct 26, 2011
 | 
author/source: Valuentum Analysts

Best-idea EDAC Tech (EDAC) reported excellent third-quarter results that exceeded our expectations. We are sticking with our conservative $10 per share fair value estimate and retaining our allocation in our Best Ideas portfolio.

As followers of Valuentum know, EDAC Tech has been one of the biggest generators of alpha in our portfolio and continues to be one of our largest positions (at about 10%)—our cost basis is just over $4 per share. We were particularly pleased with its third-quarter results, as management mentioned the quarter would be slightly weaker, on average, on its second-quarter conference call. However, the third quarter was far from that.

The firm’s top-line expanded an impressive 18%, while earnings per share came in at $0.19, which was significantly higher than our $0.12 estimate –income from operations was a record $1.8 million. The $0.19 number compares to a mere $0.02 in the same period a year ago. Profit expansion was driven by higher sales combined with a better product mix and increased operating leverage. The firm’s gross profit margin advanced to 17.8% of sales from 9.5% of sales in the same period a year ago. Importantly, EDAC Tech noted that backlog rose to $213.5 million at the end of the quarter, up from $168 million at the end of the second quarter and $133.6 million at the end of the third quarter of 2010.

Management noted that it expects the fourth quarter to be the strongest period of the year (in terms of sales) based on backlog and 2012 to be “another successful” year. All things considered, we’re expecting EDAC Tech’s stock price to converge to our fair value estimate ($10) in relatively short order.


-------------------------------------------------
The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Valuentum Exclusive publication, ESG Newsletter, and any reports, data and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, data or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor, and does not offer brokerage or investment banking services. The sources of the data used on this website and reports are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum, its employees, and independent contractors may have long, short or derivative positions in the securities mentioned on this website. The High Yield Dividend Newsletter portfolio, ESG Newsletter portfolio, Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Performance, including that in the Valuentum Exclusive publication and additional options commentary feature, is hypothetical and does not represent actual trading. Actual results may differ from simulated information, results, or performance being presented. For more information about Valuentum and the products and services it offers, please contact us at info@valuentum.com.