Should you secretly install LoJack (NASDAQ:LOJN) in your portfolio to make sure that you don't lose your money if Wall Street tries to make off with it? Let's look at the company's latest earnings report.
For the fourth quarter, this maker of stolen-vehicle recovery systems saw its top line grow by 17% to $46.4 million. Operating income was $6.4 million, coming in at 26%. Net income grew by 62%, amounting to $5 million, or $0.25 per diluted share.
For the full year, LoJack reported revenues of $190.7 million, representing growth of 31%. Operating income jumped 66% to $26.8 million. Net income increased 77% to $18.4 million, or $0.96 per diluted share.
Well, folks, you can't get much better than that, right? This report is resplendent with righteously rockin' growth rates. (Ah, alliteration!) Gross margins increased by 15% and 33% for the fourth quarter and the full year, respectively. The gross profit as a percentage of net sales remained about the same, at a little over 50%. Domestic revenues and unit sales grew by double digits, as did the international side of things.
LoJack's Boomerang Tracking product saw a 10% decline in the fourth quarter, and there were some tax benefits which aided the effective tax rate. But I must say, this is still a great report.
So am I in love with the stock? Well, yes and no. For one thing, it's already had a nice run the last couple of years. For another, the release does mention a 7% drop in new car sales for the fourth quarter. That does raise a concern to me. Do I want to enter a position in LoJack after it's had such a run-up and while new car sales are weak?
Nevertheless, the company is managing its growth quite competently. It has great brand equity in the auto security industry -- there probably aren't a lot of licensed-to-drive consumers who haven't heard of LoJack's product and reputation. Plus, it has more opportunities with markets such as motorcycles and construction vehicles.
As for guidance, the company expects more double-digit growth rates in 2006, but in terms of diluted per-share income, the appreciation will only be about 8% to 10%. That guidance includes GAAP stock expense effects (non-cash in nature), which will be a required calculation for next year. If you go back to non-GAAP measures, the growth range falls between 19% and 21%. Under that scenario, the company looks reasonably priced at approximately $24 a share. Still, investors should really consider the effect of option expenses. After all, you can see the huge difference in the growth rates. Even though they will be non-cash charges, there's still an essential cost to granting options.
I really do like LoJack, and I think its future is bright. Even so, I personally wouldn't initiate a position unless there was a nice pullback in price. I remember this stock when it was singled out at less than 10 bucks a share - I wish I'd bought it then. But there's no use crying over it.
I do think there's more growth ahead, but for this situation, I want a better deal for the growth. Do your own digging and see what you think.
Recover more info on LoJack:
- LoJack can also help protect your computer.
- W.D. Crotty had something to say about LoJack and its brand power.
Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
