Company Spotlight - EMS Technologies: |  - Co. Spotlights available via RSS feed
| Wireless Everywhere
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| | ELMG | $25.55 | The Good: Plenty of cash, low debt, good earnings.
The Bad: Volatility; small-cap stock.
The Beautiful: Strong backlog, new products, new markets. | P/E | 18 | | PSR | 1.6 | | ROE | 9% | | Debt/Eq. | 0.05 | | Div.Yield | 0% |
March 21, 2008 - EMS Technologies, Inc. (ELMG-NASDAQ) makes wireless systems that can help you communicate, whether you're walking the warehouse floor or floating in space. The company's LXE unit makes handheld and vehicle-mounted computers used for logistics management. EMS also makes microwave-based communications hardware for defense contractors through its Defense & Space Systems unit. Its SATCOM division makes aeronautical satellite antennas and Earth station antennas and control terminals used for emergency management.
This stock has a roller coaster looking price chart, going up and down between $10 and $30 over the last 12 years. Now it's getting close to the top end of the range once again, and the question is: will it break through $30 this time and keep going? Here are some clues.
Earnings are growing. While they've been tepid over the last 5 years, averaging about 3% increase a year, over the next 5 years, analysts believe the company can improve them by 15.5% a year, on average. In 2005, they were 84 cents a share, then $1.08, followed by $1.24. This year, expectations are for $1.35 and next year, $1.55.
One of the drivers behind higher expectations is the company's computers, both handheld and vehicle-mounted, used in warehouse and distribution centers. They're sold in the U.S. and abroad, about 50% in both areas. While the U.S. is suffering through a slowing economy, demand for the computers is only increasing. Same is true in Europe. The company is expanding its global reach to diversify even further.
But the big improvement is coming from SATCOM, the satellite communications business. It brings in about 27% of revenues. Military and commercial demand is increasing in the aircraft communications segment. Commercial airlines are installing in-air communications and entertainment services. One contract is with Inmarsat, a global mobile satellite company, to develop a satellite phone with state of the art capabilities. New orders from the Pentagon are pushing up the backlog.
Market cap on ELMG is $425 million with 15.45 million shares outstanding. It's a small company but growing. Sales have gone from $261 million in 2005 to $288 million last year. This year look for $325
million and $370 million next year. Analysts see sales growth of 11.5% a year, on average, over the next 5 years.
A few more numbers: Cash in the bank is a little over $130 million. Current assets swamp current liabilities by almost 5 to 1. Debt is only $14 million. The P/E is 18. The range for the P/E for the last 10 years has been a low of 17.1 and a high of 47 so it's very near the low end of its range.
This is an interesting stock with good potential. However, with so much of its sales coming from abroad (32%), be aware of the dollar's impact on the bottom line. As long it's weak, ELMG will benefit. But if it gets stronger, it may make the company's products less competitive or at the very least, show a less favorable currency exchange. And dont forget: the stock has shown a very volatile price history.
- Company Web site: www.ems-t.com
- Ted Allrich |
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