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The Big Reason Helios Technologies Stock Popped 34.3% in February

By Neha Chamaria - Updated Apr 12, 2019 at 2:38PM

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The market is taking note of how fast sales at the hydraulics manufacturer are growing.

What happened

Investors in Helios Technologies ( HLIO -0.20% ), the manufacturer formerly known as Sun Hydraulics, haven't had a month as great as February in a long time. Shares of the company, which provides hydraulic and electronic control solutions, jumped 34.3% last month, according to data provided by S&P Global Market Intelligence.

The stock shot through the roof after Helios reported its fourth-quarter and fiscal-year 2018 numbers on Feb. 25.

Check out the latest earnings call transcript for Helios Technologies.

So what

Helios absolutely crushed it with the numbers. Here are the highlights for the full year:

  • Revenue soared 48%, to a record high of $508 million. For perspective, the company generated revenue of only $197 million in 2016.
  • Gross profit jumped 41%, and operating margin improved three percentage points to 17.9%.
  • Net income shot up 48% to $46.7 million.
An upward-trending arrow overlaid on a bar chart

Image source: Getty Images.

The bulk of the growth in Helios' sales came from two major acquisitions, both in its hydraulics segment -- Faster Group, and Custom Fluidpower. Organic growth was 11%. With these acquisitions, Helios' hydraulics business has received a big boost in the EMEA (Europe, the Middle East, and Africa) and Asia-Pacific regions. Hydraulics contributed 75% of Helios' total sales in 2018, versus 67% in 2017; electronics added the rest.

Helios' outlook for 2019 further fueled investor optimism: The company expects to generate revenue between $590 million and $600 million and earn a GAAP profit of $2.10 to $2.20 per share. That would mean a massive 44% jump at the midpoint over its 2017 GAAP EPS.

Now what

Given Helios' strong operational performance for 2018 and outlook for 2019, it isn't surprising that the stock soared last month. The company has grown rapidly in the past couple of years, thanks largely to an acquisitive business strategy. As CEO Wolfgang Dangel said: "As I reflect on the past two years, I note that they represented periods of tremendous growth and diversification for Helios, as we have been successfully executing our Vision 2025 strategic plan."

Helios' Vision 2025 plan includes hitting $1 billion in revenue and maintaining adjusted operating margin above 20%. While growing via acquisitions is one thing, what should matter more to investors is how effectively the company can unlock value from its existing business, including recent acquisitions, to drive organic growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Sun Hydraulics Corporation Stock Quote
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