The cyclical nature of manufacturing may scare away some investors, but there's real money to be made in this corner of the market. Tom Gardner's Motley Fool Hidden Gems has a knack for finding underfollowed and undervalued companies, and computerized machine-tool maker HurcoCompanies
Net revenues for the third quarter grew by 24.5% to $29.6 million. Its European sales softened to a modest 13% growth, but strong sales from the United States and Asia, at 41% and 44% respectively, more than made up the difference.
Hurco also expanded gross margins by 2.6 percentage points from the year-ago quarter. SG&A (sales, general, and administrative) expenses as a percentage of net sales remained relatively flat, at 22.5% for the quarter versus last year's level of 22.1%.
Double-digit revenue growth with improving margins resulted in another bottom-line blockbuster, with net income growth of 82% year over year. Compare its king-sized earnings growth with fellow manufacturing-related company and Hidden Gems pick FARO Technologies
If there's one concern for Hurco investors, it's new order bookings. They're up 5% this quarter over the third quarter of 2004, but in that period they were up 45% over Q3 2003. Double-digit bookings growth a year ago helped to rapidly propel the company's stock from the $7 range to more than $10. Even though sales and earnings growth were stout in the latest quarter, single-digit new order bookings growth may explain why the company's shares aren't currently rallying.
With the upcoming EMO trade show (the largest metalworking trade show in the world), it's a good bet that Hurco will find some new buyers to help strengthen new orders in the quarters ahead. With attractive prospects to go along with current strong growth, there are plenty of reasons why an investor shouldn't shy away from this cyclical company.
Is Hurco too small for you? Check out what FARO Technologies is up to: