Factory-based businesses need to make sure that they have the proper equipment to get the job done. Not only that, but the tools need to be cost effective, yet reliable and durable. Factory owners are constantly looking for ways to improve their assembly lines and their overall manufacturing processes. Several needs for successful factories are precision measuring equipment, optical sub-systems and components for machines. Luckily, that is what Zygo Corporation (NASDAQ: ZIGO) makes and services. Zygo is a well regarded small-cap that was originally founded in 1970. Zygo's precision measuring equipment is an absolute must-have if you are a manufacturer of canned goods, cosmetics, and anything else that requires a certain amount of its product in a container.
Turning to the fundamentals, Zygo has a market cap of $294.86 million and currently holds a strong buy rating from analysts. The stock has a price to earnings of 8.8 and is currently trading at a nice discount to future growth or PEG at 0.49. The company has zero debt and shows cash per share to be at $4.18. This translates to healthy financial stability as we can see from a current ratio of 6.59. Earnings are expected to jump 120 percent this year and 18 percent over the next five years. Once again, looking at margins can help an investor determine the long-term strength of a company. In this case, Zygo shows that it is built to last with a gross margin of 47 percent, operating margin of 13 percent, and a profit margin of 23 percent. Those are significant values that show that the company is minimizing cost, while maintaining good sales, which means it is keeping more of every dollar (as you can tell from high profit margin).
Technically speaking, the stock recently broke out above its resistance only to retest it and continue resting on its new support. It is unclear if the stock will break back down through its once resistance or continue higher. For your records, first support is at $15.20, second support is at $14.40 and third support is at $13.97. Watch for a break in any of these levels to signal further downside. Additionally, you can use these supports as buying opportunities should the stock correct at any point.
The bottom line here is that the "Made in USA" tide is coming back and businesses are looking to upgrade old factories, which is known as capital expenditures. Zygo offers a vital component to the manufacturing process that is in high demand. Additionally, the company is very well positioned to profit from this coming change as its products are cost effective. With no debt and ample cash, Zygo can conduct further R&D projects or simply buy back shares. Either way, it will help the stock price. This is a great long-term play as the manufacturing boom is only just in the early stages. It is recommended to watch for any ideal entry points.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.