I look for companies that I believe might be well worth an investor's time to research, and I think FEI Company (FEIC) is one of them. Here is a company that has been growing at double digit rates for almost 5 years. It has plans to double its revenue in the next four years and is worth one's time for further research to see if it is a good investment for you.
Located in Hillsboro, Oregon, FEI Company was founded on 1971 and sells scientific instruments for nanoscale imaging at the atomic level. (Electron microscopes) The company has three had main divisions: the Materials Science segment's high resolution imagining is used in mining for automated mineralogy and oil and gas exploration; the Life Sciences segment offers ultra-high resolution imaging for cellular biologists and drug researchers to create 3D reconstructions of biological structures; the Electronics segment offers products used in laboratories to enhance new product development and increase yields by enabling 3D wafer meteorology. FEIC is a high tech company that has been growing at a healthy clip, offering investors an excellent opportunity for continued growth.
Why do customers like FEIC's products so much? There are a couple reasons for this. First of all FEIC is the technological leader in its field of high resolution electron microscopes. The company can show you individual atoms with greater clarity than its competition and has moved beyond simple resolution to analytical evaluation. FEIC can tell you the type of atom, whether silicon or carbon. From a technical standpoint its analytical capabilities are second to none in the industry. Secondly, they don't just sell complicated microscopes. They use their products to help clients find solutions and solve problems for individual markets. They may ask their clients: "What are you trying to do with your specific workflow?" Then they help them with the answer. FEIC does more than sell an electron microscope, it helps clients with solutions and this is one reason it leads its competition.
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This service approach has helped the company with a healthy growth record.
FEI Co. has had an amazing revenue growth record increasing at 11% annually. Earnings growth has also increased over 73% for the same 5 year period. How will they continue to be so successful? It's the "Group Structure" the company has adapted to continue to facilitate future growth.
FEI Co. "Group Structure" gives it a Competitive Advantage
Ultimate Strategy: Double its serviceable market from 2011-2015. In order to do this, it is reorganizing the company into a group structure to increase efficiency. It will reorganize into two groups: the Industrial Group will tend to customers that purchase FEIC solutions to improve yield, reduce cost, or speed time to market resulting in improved profitability. The second group will be called the Science Group working with customers using FEIC solutions for advanced research and discovery.
Why does the company continue to grow when the macro-economic climate is so challenging? The "solution-based" service will continue to expand into areas where money already exists as the company finds its "piece of the pie" in these markets. Life Sciences and natural resources as have money being spent and the company continues to move into these markets.
As an example, take the oil exploration industry that spends $1B annually in "Surface or mud logging." Mud logging, also known as hydrocarbon well logging creates detailed records of a borehole by examining the bits of rock or sediment brought to the surface by the circulating drilling medium (most commonly mud). The mud logging company is normally contracted by the oil company. They then organize this information in the form of a graphic log, showing the data charted on a representation of the well-bore. Present research usually uses an optical microscope but FEIC can produce more detailed and consistent information with a combination of the right electron microscope and software. For certain types of wells, this information is very useful. Similarly, in Life Sciences, the structural biological world, and other places optical microscopes are presently used, the company can combine software with its microscopes and provide better analogy. This is the reason the company will continue to grow and acquire more and more business in existing markets that are spending money already on services that are needed.
Have you noticed the gross margins increasing every year? There are two main reasons for this. The company's "products with specific applications" are semi universal for differing markets. When products can be fine tuned to improve operating efficiencies, the costs profit margins are higher. The second deals with the improved product building efficiency with the expansion of the factory in Brno, Czech Republic. FEIC has been operating a site in the Czech Republic since 1998. Production has grown from under 10% of product revenue to nearly 60% projected for 2012. FEIC has approximately 500 employees in the Czech Republic.
FEIC's competition comes from three sources globally. Two large global conglomerates, Hitachi Hi Tech is a publicly traded company and Carl Zeiss is a privately owned company that also competes with FEI Co. Both these companies have smaller divisions within the company that provide electron microscopes JEOL Ltd. out of Japan is another public company that competes and is strong in transmission electron microscopes.
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Technically Speaking
The stock has been healthy and moving up since September of 2010 and 2012 was the best year yet, as one can tell by looking at this weekly chart. Throughout the whole year, if one observes the RSI indicator, even the lows stayed above the '50' line and this means strength. The MACD also can be seen mirroring the same thing as the MACD MA's remain well above the '0' line. As the stock moves within the Bollinger Bands, it tends to stay well above the bottom band and well above the 40 day MA.
In Summary
I believe FEI Co. is a well kept secret that has great potential for long term growth and a possible strong income company as time progresses. The double digit growth the company has experienced will continue and there are plenty of markets that spend money already that will welcome the company's solution-based service marketing. FEI Co. is worth your time to do your own research and see if it is worth adding to your portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
