Are you looking for an industrial-services company that keeps growing long after the average useful life of a standard Mr. T Chia Pet? If so, then look no further than TEAM (Nasdaq: TISI).
This hot-pipe specialist, which started back in 1973, has been, er, piping hot for the past nine years. Over that period, it has grown revenues by 30% annually, and its earnings per share have had a 55% compounded growth rate. Based on recently reported financial results, it doesn't expect to cool off anytime soon.
Earnings for the most recent quarter grew by 31% over last year's levels to $10.2 million (or $0.51 per share) on $149 million in revenues, which increased by 22%. Management reaffirmed guidance, which calls for full-year earnings per diluted share between $1.45 and $1.60 -- fiscal 2008 EPS were $1.20.
So what's the catch?
Last year's results had cash flows from operations more closely aligned with its annual net income than in previous years -- a sign of "healthier" earnings, and TEAM's shareholders would probably like to see that trend continue.
It has $98 million in long-term debt, but that's not overly excessive, given the overall enterprise value of $587 million. Besides, it hasn't had trouble making its interest payments lately, and its quarterly operating profit was more than 13 times its net interest expense.
Moreover, its maintenance and repair activities could do well despite softening demand for new project construction, so it's somewhat hedged from a weak macroeconomic environment. The industries that it serves can't afford to scrimp when it comes to the kinds of services TEAM offers -- it would be difficult to envision a refiner such as Sunoco (NYSE: SUN) or a global aerospace company such as Raytheon (NYSE: RTN) letting an old or faulty pipeline go unattended.
Looks like a winner
I'm looking forward to reviewing TEAM's recent figures in more detail once it officially files those results with the SEC. So far, it stands up to every test I can think of to expose weakness in a company, and I believe that it will continue to do well for quite some time. At just less than 20 times trailing EPS, its price isn't the bargain of the century, but I like TEAM for its long-term prospects.
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