We might blame this stock's recent decline on honest management. Their near-term outlook sees trouble for machine tools in Europe, autos in North America, and continuing weakness in the semiconductor-marking business.
Is there cause for concern that this Motley Fool Hidden Gems recommendation is heading for an earnings shortfall?
Let's start with the analysts. They see the company earning $2.35 this fiscal year (which ends in September) and $2.92 a share (a 24.3% increase) in 2006. That's great news.
Then look at the balance sheet. Wow, $108.7 million in greenbacks and $48.5 million in total debt. This is a small, cash-rich company.
So, why does this stock sell for such a low multiple to earnings?
It's not due to a building debt load. While cash increased by $8.4 million over the comparable year-ago quarter, debt fell $6.3 million. These are both positive trends.
The company doesn't have the Hidden Gems trait of being undiscovered. Five analysts provided an earnings estimate for 2006, and 74.7% of the stock is owned by institutions. The share base is small, at 15.1 million shares, but that doesn't explain the low earnings multiple. Heck, competitors Coherent
The simple reason for the stock's recent swoon (although it is still up 32.6% over the last 52 weeks) may be the January stroke of its chairman and CEO. Peter Wirth had led the company since its IPO spinoff from Siemens
The company announced separately that interim CEO and Chairman Gunther Braun (previously the CFO for nine years) would take control of the company -- although Mr. Wirth will continue to contribute. Maybe, with the leadership issues out of the way, the stock can climb in market valuation. Based on fundamentals, it looks very cheap.
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