Raven Industries, Inc (RAVN) is a well run company that boasts a superior service and support team. Raven offers a good business model, which is based on constant innovation, good management, fair and honest employee relationships, and world class customer service. It also prides upon its low financial leverage and well maintained working capital. Raven has carved a niche for itself in the industries it operates and draws very high customer loyalty. The company is a buy for long term investors that are looking for sustainable profits.
Raven Industries has a focused vision of providing excellent customer service and innovative products to its customers. The company benefits from great management, and high customer loyalty. Due to its culture of service and innovation, Raven has been listed in Forbes' "America's Best Small Companies" list for the last seven consecutive years.
Raven's largest and most profitable unit is Applied Technology. Applied Technology designs and manufactures innovative precision agriculture products. These products help growers reduce costs and improve farm yields around the world. The second largest division at Raven is Engineered Films. Engineered Films produces high-performance plastic films and sheeting for industrial, energy, and agricultural applications.
Aerostar is the third and the smallest of the 3 divisions. It manufactures high-altitude research balloons, and radar systems.
Raven's greatest competitive advantage is in its customer service. Its customers attribute their loyalty to the high-quality service. Raven's skilled team of agriculture specialists offers support at both in-field and dealer locations. The tech support staff is highly trained and has powerful online support and training tools available. Such commitment to superior customer service has and will continue to help the company grow in the future.
In addition, the company invests heavily in innovation. The company continues to streamline its operations and achieve efficiencies in manufacturing through the use of advanced technology. Raven's Engineered Films Division recently introduced new products such as "VaporBlock G, the first vapor barrier on the market to exceed ASTM Class A and qualify for LEED standards". "The company also continued work on a research and development collaboration with Arizona State University related to biofuels. This project has led to several commercial opportunities." Raven has recently renovated and expanded its innovation campus. At this facility, the company provides state of the art training to its dealers and partners. Raven takes innovation very seriously and would benefit from well deserved future innovations.
The company enjoys good management. For instance, the CEO, Daniel A. Rykhus, has been with the company since 1990. He was the general manager of Applied Technology for 12 years, during which time he oversaw a five fold increase in sales at the unit. Mr Rykhus does an excellent job of setting the right tone as regards the company's customer service and innovation. He also emphasizes fairness with employees, and providing them meaningful opportunities to grow in their careers.
The annual report of Raven proudly lists eleven years of financial data, and for good reason. The company boasts a very healthy current ratio of 4.74. Current ratio has not fallen below 2.9 in the last eleven years, and the management seems focused on keeping things the way they are.
More importantly, the company has no long term debt. Again, the company is proud of its capital structure and intends to maintain it. The profit margin is healthy at 12.9% and has seen a rise in the last decade. Raven has done a good job of maintaining a clean balance sheet and it merits serious long term investment consideration.
The PE ratio(ttm) of the company is rather high at 23.76. However, in view of the good business model, and good financial records, the stock seems a buy. The revenues of the company seem set to grow for a very long time and should justify the higher PE ratio.
Raven faces the most sensitivity in its Aerostar division that receives orders from the Federal government. Aerostar is the smallest of the three divisions and earns the lowest margins. It would be prudent for the company to increase its focus on the other two divisions, which are likely to be far more profitable in the future. Aerostar may continue to pull down the earnings in the near future.
The company must continue to invest in its customer service and innovation. The most important task for the management is to maintain its competitive advantage on the service side. As long as the company can maintain an edge there, its customers would always have a strong reason to be loyal.
Raven is a 'BUY' for long term investors. The company has a great future owing to its world class customer service and good financial books. As long as the company can maintain its high standards of workmanship, it should have no problems earning high profits.