Tiny telecom equipment maker Radyne
What analysts say:
Buy, sell, or waffle? Nothing has changed here in six months. There are still only two analysts following the firm (a plus in our book; it can't be a "Hidden Gem" if everyone is watching it). Both still rate the stock a buy.
Revenues. Now that we've got a full year of post-Xicom results under our belt, Radyne's quarterly sales should be returning to "normal" growth rates. On average, analysts predict a 9% rise to $35 million.
- Earnings. And 12% improvement in profits to $0.18 per share.
What management says:
The big news at Radyne this quarter was undoubtedly the change in who's running the show. Did you miss it? We've got you covered in "Radyne's New Boss."
What management does:
Emphasis on the "sales" part. By now, you're likely aware that Radyne's margins are dropping because the Xicom acquisition brought lower-margin sales with it. Still, slightly lower margins on vastly greater sales are a perfectly valid way to grow profits. Although gross margins continue to erode as Xicom's input gets fully incorporated into the rolling results, we're now beginning to see the rolling operating margins rise once more, while the net erosion stabilizes.
One Fool says:
Why the divergence between gross, and operating and net margin trends? Consider the last six months' results. Year to date, sales have grown 92%, but the cost of goods sold rose 118% as the full effect of Xicom's lower-margin business made itself felt. Good news, though -- selling, general, and administrative costs are rising much slower than either of the numbers higher up the income statement -- just more than half as fast as sales had been rising, in fact, at 49%.
That said, next week we begin a whole different ballgame at Radyne. We will finally be able to begin comparing proverbial apples to other proverbial apples, and see how well the integrated business grows its sales in comparison to (a) the growth in the cost of the raw materials needed to make the goods that constitute those sales, and (b) the growth in the cost of running the business. Tune in next week for a full report.
- Scopus Video
- Mission West
Read up on Radyne's pre- and post-Xicom past in:
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Fool contributorRich Smithdoes not own shares of any company named above.