Judging from the email I received when I last wrote about American Science & Engineering
Despite the skeptics (and my own worries about inventory and insider selling), there was certainly not a big problem with their fourth-quarter results, in my opinion. Revenues reached their second-highest quarterly total ever, checking in at $40.7 million -- 51% higher than a year ago. Earnings for the quarter totaled $0.51 per share, which was quite a bit weaker than the $0.76 estimate from the analysts, but a change in warrant valuation reduced the EPS number by $0.43 per share.
So the big question is whether AS&E can maintain strong growth in the future. It certainly has some growth drivers in place: Several of its OmniView Gantry systems are included in a $45 million contract to a Middle Eastern customer, and management has introduced a new parcel search system called Gemini for searching suitcases, briefcases, and purses. Furthermore, things appear to be progressing with the Transportation Security Administration's evaluation of AS&E's personnel screening system called SmartCheck.
There are basically two difficulties that I see for AS&E over the next year. The first is that unlike its Z Backscatter Van (ZBV) product, it faces competition from both OSI Systems
The second difficulty involves maintaining or increasing the level of ZBV sales. About 40% of the 180 ZBVs sold so far have been to the U.S. government, but will Uncle Sam continue placing large orders? If not, AS&E will likely have to find another big customer.
I certainly can't claim to know whether strong growth will continue this year, but I definitely like the stock a lot better at $60 per share than I did at $90. Uncertainty is unavoidable in investing, but if you own this stock, you can take comfort in the fact that the potential gain is much larger than the potential loss.
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Fool contributor Dan Bloom doesn't own shares of any stocks mentioned in this column. Feel free to email your comments to him.