Click ***HERE*** for my PODCAST on GARDNER DENVER
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I was looking through the list of top % gainers on the NYSE today and came across Gardner Denver Machinery (GDI) which as I write is trading at $58.68, up $2.98 today or 5.35%. I do not own any shares of this company nor do I have any options.
According to the Yahoo "Profile" on Gardner Denver, the company
"...engages in the design, manufacture, and marketing of compressor and vacuum products, as well as fluid transfer products. Its Compressor and Vacuum Products segment offers rotary screw, reciprocating, sliding vane, and centrifugal air compressors; positive displacement, centrifugal, and side channel blowers; and liquid ring pumps and engineered systems for industrial and commercial applications."What drove the stock higher was the announcement of 4th quarter earnings. As reported:
"Revenues for the three months ended December 31, 2005 were $369.3 million, a 53% increase compared to the fourth quarter of the previous year, primarily as a result of acquisitions completed in 2005 and strong organic growth. Net income for the three months ended December 31, 2005 was $25.3 million, an 86% increase compared to the same period last year, as a result of the benefit of acquisitions and flow-through profitability on organic revenue growth. Diluted earnings per share for the three months of 2005 was $0.96, 43% higher than the previous year. Cash generated by operations increased 55% to $119 million in 2005, compared to $77 million in the previous year.This report was very strong as the company exceeded estimates of $.77/share and also raised guidance for 2006. This is indeed what I like to call a "trifecta" in an earnings report!
And what about longer-term results? Looking at the Morningstar.com "5-Yr Restated" financials on GDI, we can see that revenue has grown steadily from $379 million in 2000 to $420 million in 2001, then dipping slightly to $418 million in 2002. However, since 2002, the revenue growth has accelerated to $740 million in 2004 and $1.09 billion in the trailing twelve months (TTM).
Earnings have also been erratic with $1.21 reported in 2000, and $1.27 reported in 2003. However, since 2003, earnings have grown strongly with $1.92 reported in 2004 and $2.44 reported in the TTM.
Free cash flow has been positive and growing with $39 million in 2002, $57 million in 2004 and $77 million in the TTM.
The balance sheet shows cash at $114.6 million and other current assets at $4.8 million. With current liabilities of $316.5 million, this gives us a current ratio of close to 2.0 which is solid. The long-term liabilities stand at $779.3 million.
What about some key numbers on this stock?
Looking at Yahoo "Key Statistics" on Gardner Denver Machinery, we find that this is a mid-cap stock with a market capitalization of $1.52 billion. The trailing p/e is moderate at 24.36, and the forward p/e (fye 31-Dec-06) is even nicer at 19.31. With the strong growth in earnings, the PEG (5 yr expected) comes in at a bargain-level 0.60.
Reviewing the Fidelity.com eResearch website, we can see that even by the Price/Sales ratio, GDI is reasonably priced. According to Fidelity.com, the company belongs in the "Diversified Machinery" industrial group. Within this group, the most expensive stock (by Price/Sales ratio) is Roper Industries (ROP) with a Price/Sales ratio of 2.5. Next is Pall (PLL) and Illinois Tool Works (ITW) at 1.9, followed by Ingersoll-Rand (IR) at 1.3. Gardner Denver (GDI) is next at 1.1 and Eaton (ETN) is the most reasonably priced in the group with a Price/Sales ratio of only 0.9.
Looking back at Yahoo for some more numbers on this stock, we find that there are 25.97 million shares outstanding, and 25.52 million of them float. Of these shares, 1.15 million shares are out short representing 4.50% of the float or 8.1 trading days of volume (the short ratio). From my perspective, this is significant being over 3 days of volume, and with the strong earnings report, there is likely a bit of a squeeze of the shorts going on as they scramble to buy shares driving the stock higher yet.
No cash dividend is reported and the last stock split was a 3:2 split paid in December, 1997.
What about a chart? Looking at a "Point & Figure" chart on GDI from StockCharts.com:
We can see that the stock trading weakly between April, 2002, when the stock hit a price of $27, down to a low of $14.50 in November, 2002. Since then, the stock has traded strongly higher for the past three straight years, reaching the $58.70 level today. The stock looks strong to me!
So what do I think? In summary, the stock is moving higher today in the face of a weak market on the back of a solid earnings report. Both earnings and revenue climbed strongly and the company beat expectations. In addition, the company has raised guidance for 2006. A solid report.
Morningstar.com, at least for the past three years looks solid. Prior to this, the numbers were flat. However, things appear to have turned around in 2003 and 2004, and thus the chart looks good during this period as well. Free cash flow is positive and growing and the balance sheet looks nice with a current ratio of almost 2:1.
Valuation-wise, we have a stock with a p/e in the 20's and a PEG at about 0.64. The Price/Sales ratio is also one of the cheapest in its industrial group coming in at 1.1. This also looks nice.
Finally, the chart looks strong.
In fact, there isn't much I don't like about this stock. The stock price may be a bit ahead of itself, I like it when the price hugs that support line, but that is in itself a weak criticism, especially with the reasonable valuation.
Since I just sold a stock at a loss, I am in no position to be buying anything at all anyway. But if I were.....:). Thanks so much for stopping by and visiting. If you have any comments or questions, please feel free to leave them on the blog or email me at firstname.lastname@example.org.