In the 1994 film Little Big League, Ken Griffey Jr.'s mid-air catch robs the Minnesota Twins of a wild-card playoff spot and crushes protagonist Billy Heywood's dreams -- but not his spirit.
Life imitates art when aspirations overestimate ability. A small industrial provider of services for maintaining high-heat and high-pressure piping systems recently discovered that its previous high hopes for the fiscal year are in fact unrealizable. Yet like Billy Heywood, TEAM (NASDAQ:TISI) will press onward.
Clubber Lang
Rocky Balboa lost a few fights, and he barely managed a draw against Thunderlips. Back in January, TEAM had the swagger of a champion. While the rest of the world was going bankrupt, management's low-end estimates predicted a bottom line 21% higher than last year.
Instead, facing weaker demand and adverse effects of the strengthening dollar, management has now lowered 2009 revenue and earnings projections by $20 million and $0.20 per share, respectively. Markets reacted hastily to the news, and shares traded lower on fairly heavy volume after last Thursday's announcement.
TEAM is no underdog, though. It grew so rapidly over the last decade that even if it were still capable of achieving its previous high-end estimates, those results would pale in comparison to its compound annual EPS growth rate since 1999: a freakish 58%. Rocky had his glory, and so will TEAM.
Can't always win
Famously dominant, the Harlem Globetrotters claim 345 career losses as a franchise. Perhaps TEAM was due for a setback. After all, a company can't report phenomenal growth every quarter.
Management remains confident about its long-term prospects, and estimates that TEAM currently controls only one-fifth of industrial services market share, which means there's plenty of room for growth.
Furmanite (NYSE:FRM) is a smaller competitor doing exactly what TEAM does. Solid earnings growth prospects and a market cap closely aligned to its enterprise value might make it an intriguing takeover target for TEAM. Flowserve's (NYSE:FLS) operations also parallel TEAM's, but on a larger scale; Flowserve's size gives it comparative advantage in the industry. Since the two are already similarly leveraged and perform the same functions, an acquisition of TEAM by Flowserve would also make sense.
Having sported a multiple of 25 just one year ago, TEAM's stock price has settled at about 10 times forward earnings per share. All else equal, should TEAM's stock revert to trading at the forward P/E levels it saw last year, investors buying now could be handsomely rewarded.
More Foolishness:
