Spinning Towards a Better Future with NVE Corp.

NVE Corporation (NVEC) may not be the most well-known technology company in the world, but its products could pave the way towards smaller, more rugged devices that consume less power.

A Look at the Second Quarter

During the second quarter, NVE Corporation saw its earnings jump 54.4% to $2.93 million on revenues that increased 40.5% to $6.83 million. The improvement in gross margins was primarily due to a more favorable revenue mix, as the company saw an increase in contract research and development versus product sales revenues.

Despite the 311% jump in research and development revenues, NVE Corporation warned that the growth may not be representative of future trends and there can be no assurance of additional or follow-on contracts for expired or completed contracts in their 10-Q filing with the SEC. Meanwhile, the jump also led to a possible-temporary drop in expensed R&D activities.

NVE Corporation’s balance sheet also remains robust with $1.25 million in cash, a current ratio of 3.47, no long-term liabilities and a quick ratio of 20.66. Altogether, these metrics suggest that the company remains in strong financial condition in terms of both short-term liquidity and long-term debt to asset levels, which is good news for shareholders.

A Leader in Next-Generation Spintronics

NVE Corporation was founded in 1989 as Nonvolatile Electronics, Inc. and didn’t enter the Wall Street scene until 2003. Since then, the stock has surged from an IPO price of just $7.85 per share to its current price of more than $50 per share. The company’s technology, protected by 51 U.S. patents, serves customers ranging from St. Jude Medical to the U.S. Government.

NVE Corporation specializes in so-called spintronics, which takes advantage of the natural spin of electronics instead of their charge to transmit and store data. As a result, the technology can help create smaller, more rugged devices that consume less power than traditional electronics. From hearing aids to pacemakers, this technology is quickly revolutionizing several markets.

Future products may not be commercially proven, but they do represent some real potential. For example, NVE Corporation’s MRAM (or magnetoresistive random access memory) is a patented next generation version of traditional RAM that is more dense (holds more), faster (works more quickly) and less volatile (more rugged) than its alternatives like DRAM and SRAM.

Conclusion

NVE Corporation is a market leader in spintronics, which may become the next big thing in electronics. The company’s unique specialization, fast growing revenues, improving profitability, and reasonable valuation of less than 25x could make it a compelling value.

Disclosure: No positions

Comments

[The Inflect...:]

Love the story, been watching for years, just not sure about the 10 Price to Sales ratio....good luck, John

Aug 30 07:44 PM

[User 479586:]

What a bunch of crap, the CEO has been promising licensing deals since 2004 with Freescale and nothing ever came of it. He used to talk about it in his conference calls and doesn't even bother mentioning Freescale or the new Everspin that is currently making MRAM and has not licensed anything from NVE.

Aug 31 12:05 AM

[Ron Mertens:]

NVE seems to make great business out of spintronics. The MRAM business might be a great bonus - as they still work on this technology, in several applications.

Ron

Aug 31 02:37 AM

[Ron Mertens:]

By the way, here's some more info on MRAM for those interested:

www.mram-info.com

Ron

Aug 31 02:38 AM

[Quirky Werk:]

The comment below from the piece indicates the author has no concept of NVE's strategy, and therefore the rest of his claims and suppositions are unreliable ...

"Despite the 311% jump in research and development revenues, NVE Corporation warned that the growth may not be representative of future trends and there can be no assurance of additional or follow-on contracts for expired or completed contracts in their 10-Q filing with the SEC."

Aug 31 10:11 AM