Satellite-equipment maker Radyne
The Motley Fool Hidden Gems recommendation saw sales dip below last year's mark, to $36.3 million, while the $0.19 per share in profits the company posted took a penny-per-share hit from stock-option expenses. Sales were off for the second quarter in a row, and the first half of 2007 also isn't looking stellar, meaning this stock might remain in a holding pattern for a while.
Still, Radyne has been introducing new products and making acquisitions that should give it a better position in the future. It's just that those maneuvers take time to play out.
For example, its acquisition of Xicom Technology led to a full-year 30% growth in sales. On the strength of high-power amplifiers that are used in broadcast and broadband applications worldwide, Radyne saw a pro forma increase in sales of 30% by Xicom from a year ago. Couple that with the introduction of a new modem card and strong backlog orders in January, and it's possible the company could see its results energized next quarter.
It did pay off the little debt it had and reported a net cash increase of $15.4 million. Yet it was noted on Radyne's Hidden Gems discussion board that two-thirds of that increase was due to things that had nothing to do with the business of producing satellite equipment.
The stock sits nearly 50% below the highs it saw last spring, when lethargy suddenly hit sales. Like now, back then Radyne had reported that it had new products and potential, but that ultimately didn't translate into bigger profits. I would expect that despite management's promise of a strong backlog in January, the company will essentially trade sideways until it can prove that such promises can translate into greater sales and earnings.
Radyne had rocketed before on a business model that was working well. Now it needs to put itself back in orbit by showing that it can do so consistently.
Radyne is a recommendation of Motley Fool Hidden Gems. Join the discussion with a 30-day free trial and find out whether members think this is still a rocket to ride.
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy thinks Mars ain't the kind of place to raise your kids.