Signs, signs, everywhere signs
Okay, with a show of hands, how many of you have actually heard of Daktronics? See, I told you! You may be surprised to see that Daktronics
Not exactly the sexy tech business you've come to know and loathe, but someone has to make these signs, right? And chances are that when you look up at the First Union Center scoreboard to see how bad Shaq is whooping your Sixers, or at the Green Monster to see that Pedro is mowing them down again, that scoreboard was probably built by Daktronics. They also make signs for the highways that tell you about the upcoming crashes you can look forward to being stuck behind for three hours or so. Sweet.
Based in South Dakota, Daktronics has 23 sales offices around the country. Their recent contract wins include everyone from Michigan State University and the New England Patriots to Delta Airlines and the Washington State Department of Transportation. Daktronics' financial statements show that they have been doing a great job selling. In the most recent quarter, the company reported a 23% rise in revenue and a 40% rise in net income. Its stock is trading at around 32 times $0.46 trailing earnings per share (EPS). Estimates for the coming year are for $1.15 per share. Daktronics also has a fairly consistent record of increasing revenue and EPS.
With all of this, what's the punch line? There are a few things for you to consider: Daktronics does a lot of short-term financing through banks and doesn't have a ton of liquidity (cash and equivalents), and the nature of their business is such that it takes a long time to complete a contract and to receive the revenue for the job. Also, should sports and entertainment go through a cyclical downtrend, business could be hurt.
That said, management seems to be doing a decent job of managing cash flow and providing quality products to its customers. At the current price ($14.97 at this writing), the stock is trading around its projected growth rate of 30%. In keeping with the spirit of "little known," only 14% of the stock is owned by institutions.
Will we look again in five years and see Daktronics Inc. still on the list of great performers? We'll have to see. No matter what happens, though, this company is living proof that you don't have to be super-high tech to compound some serious investment returns. Kudos to Daktronics for its past five years.
David Forrest (TMFBogey) does not own shares of any company mentioned in this article, but he's a big fan of Providence College basketball. Unfortunately, he's not sure if the Friars use a Daktronics scoreboard. To see his stock holdings, view his profile.
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