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I was looking through the list of top % gainers on the NYSE today and came across Harman International, which was leading the 'pack', trading at $94.77, up $13.77 or 17.0% on the day! I do not own any shares of Harman, nor do I own any options.
According to the Yahoo "Profile" on Harman (HAR), the company "...engages in the design, manufacture, and marketing of audio products and electronic systems for the consumer and professional markets."
What pushed the stock higher today was a news story that came out this morning about two new contracts from Chrysler and Audi, worth more than $500 million in annual revenue combined ($200 million from Chrysler, and $350 million from Audi beginning in 2008).
On April 21, 2005, Harman (HAR) announced 3rd quarter 2005 results. For the quarter ended March 31, 2005, net sales increased 8% to $742.6 million from $690.4 million the prior year. Net income for the quarter was $63.5 million, up 45% from $43.7 million the prior year same quarter. On a per share diluted basis this came in at $.90/share, up 43% from last year's $.63/share.
How about longer-term? Reviewing the "5-Yr Restated" financials from Morningstar.com, we can see the steady revenue growth, accelerating recently, from $1.7 billion in 2000 to $2.9 billion in the trailing twelve months (TTM).
Earnings have been a bit more erratic, dipping to $.48/share in 2001, from $1.03 in 2000. However, since 2001, HAR has been steadily increasing earnings to the $2.78/share in the TTM.
Free cash flow has been solid and growing, increasing from $65 million in 2002 to $313 million in the trailing twelve months (TTM).
The balance sheet is solid if not overwhelming. The company has $299.9 million in cash and $837.1 million in other current assets. This is plenty to cover both the $643.3 million in current liabilities and the $414.5 million in long-term liabilities combined.
What about "valuation" and other statistics? Taking a look at the Yahoo "Key Statistics" on HAR, we can see that this is a large cap stock with a market capitalization of $6.18 billion.
The trailing p/e is 30.01, with the forward p/e (fye 30-Jun-06) only 23.97. Thus, with a rapid growth in earnings estimated, the "5 yr expected" PEG is only 1.12.
Price/Sales is reported at 1.85. Using my Fidelity.com research, I found that Harman is sitting in the "Electronic Equipment" industry group. Other companies in this group and their Price/Sales ratios reveals that HAR is reasonably priced: Digital Theater Systems (DTSI) is selling at a P/S of 4.3, Avid Technology (AVID) at 3.1, Echostar Communications (DISH) at 1.8, and Pemstar (PMTR) at 0.1.
Other statistics from Yahoo show that there are 67.35 million shares outstanding with 62.97 million of them that float. Of these, as of 5/10/05, there were 2.03 million shares out short representing 3.30% of the float or 2.4 trading days of volume.
The company has paid a $.05/share dividend yielding 0.06%. The last stock split was a 2:1 split in December, 2003.
How about a chart? Taking a look at a "Point & Figure" chart from Stockcharts.com:
we can see that this stock was trading much stronger throughout 2004, climbing from a low of $71 in May, 2004, to a high of $132 in January, 2005. However, the stock has traded lower since, breaking its support at $86 in April, 2005. Recently, the stock found support as low as $69 in May, 2005, and has been climbing strongly, breaking through resistance at $95. Not exactly an overwhelming show of strength at all, but recently, at least over the short-term, the stock has been trading stronger.
So what do I think? Well, the news today, with possibly $500 million of new business annually by 2008 with Chrysler and Audi is a very bullish announcement. The latest quarter was strong, and the past five years has also shown fairly steady growth. Free cash flow is positive and growing and the balance sheet is reasonably solid.
Valuation-wise, the stock is reasonably priced at this level (imho), with a Price/Sales ratio below average, and a PEG just over 1.0. The chart could look nicer, and is far from impressing me with anything but short-term strength, but except for my own concerns about the automotive business and the chart, the company does look interesting!
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