Polypore's 2011 Points to Promise

Polypore International (NYSE: PPO  ) , a Charlotte, N.C.-based filter technology specialist, makes parts for use in batteries that help run things such as tablets, smartphones, and electric-drive vehicles (EDVs). To the savvy investor, 2011 may very well have become a turning point for growth in this company. During the first half of the year, investors seemed to be on board, but that optimism later turned sour. Here's why.

Early 2011
Polypore started things out strong with back-to-back earnings announcements that smashed expectations. Though management never gave specific outlooks, it repeatedly cited increased demand for the company's products as reason to view the future optimistically.

During the first half of the year, that was music to investors' ears.

Polypore International Stock Chart

Polypore International Stock Chart by YCharts

Late 2011
But then in August, things started to head south. Even though the company recorded an eye-popping 85% increase year over year, investors didn't like what they heard moving forward.

To Fool contributor Neha Chamaria, that reaction seemed silly. The main reason the company told investors to temper their short-term outlook was a good one: IT would be spending money to expand its capacity to meet customer demand.

With battery companies such as Exide Technologies (Nasdaq: XIDE  ) and EnerSys (NYSE: ENS  ) demanding more of what Polypore has to offer, the company has no choice but to spend the money to expand if it wants to meet demand. And if EDVs ever take off from the likes of Tesla (Nasdaq: TSLA  ) or even Ford (NYSE: F  ) , the future could prove even more lucrative for Polypore and make this buildout look even more prescient.

So even though the company finished 2011 on a down note, I believe Polypore could have a bright future.

Polypore International Stock Chart by YCharts

2012 and beyond
Though I believe the future is bright for Polypore, it's not The Motley Fool's Top Stock for 2012. Instead, our analysts have found a company that has all the greatness of Costco baked into its DNA but operates in the quickly growing economies of Central and South America. Get your copy of our special free report detailing the company today, absolutely free!

Fool contributor Brian Stoffel owns shares of Costco. You can follow him on Twitter, where he goes by @TMFStoffel.

The Motley Fool owns shares of Cisco Systems and Ford and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Polypore International, Cisco, Ford, and Tesla Motors and creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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