Firms experiencing truly outrageous sales growth are rare. That's why they tend to make the best Rule Breakers. Yesterday I profiled three, but I goofed: I think I should have included Universal Display Corp.
A Motley Fool Rule Breakers selection, Universal Display produces what are called organic light emitting diode technology, or OLED. Small molecules of organic material literally light up to produce images, unlike liquid crystal screens, which depend on a backlight. There's more science to it than that, of course. But such details are over my head, so you'll have to pardon me if I stop there and just tell you this is cool technology.
More importantly, it's in demand. Universal Display saw first-quarter sales rise a breathtaking 123% over the same period a year ago, and its $3.27 million in revenue beat Street estimates. The company also reported a slimmer-than-expected net loss of $0.12 per stub. Analysts had projected $0.14 a share, according to Capital IQ.
Most interesting to me, however, were Universal Display's receivables, which were up nearly 99% over last year's Q1. That suggests a heavy dependence on extending credit for sales growth. Chief financial officer Sid Rosenblatt confirmed as much in an interview this morning. Specifically, Rosenblatt credited the higher receivables to new sales from Taiwanese customers who demand 75 days to pay their bills.
Frankly, I'd be concerned by that lag if Universal Display didn't have what I'd call a reasonably good liquidity position. For example, the firm eliminated $4.4 million worth of debt while boosting net cash by roughly $10 million. To be fair, much of this gain has come from issuing shares. But massive growth in sales and earnings has more than offset the dilution.
The company is also selling to the right region -- Asia-Pacific -- at the right time. Consider: Taiwan, Korea, and Japan combined for 56 million of the 61 million OLED units shipped during 2005. That created $600 million in sales, according to Korean researcher Displaybank. And the market is expected to expand to $3 billion by 2007. That's a fivefold increase in two years, and Universal Display is right smack in the middle of the opportunity. Outrageous, indeed.
Let us help by shedding light on related Foolishness:
- You've got the analysis; now get the numbers.
- Last time we checked in with UDC the results were pretty good, too.
- Is Universal Display a stock for the next generation?
Universal Display is a Motley Fool Rule Breakers selection. Ask us for an all-access pass to find out what other stocks are helping David Gardner and his Foolish band of analysts beat the market's average return by more than 17%. It's free for 30 days.
Fool contributor Tim Beyers only breaks the rules in his portfolio. Wimp. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out which stocks he owns by checking Tim's Fool profile . The Motley Fool has an ironclad disclosure policy .
