I think AYSI is more compelling today than ever. The simple case for AYSI is that they are showing record shattering earnings and growth in a hot industry where they own a disruptive technology. This has put them in a position to rapidly expand their operation and accordingly their sales and earnings.
The macro picture for mining looks very favorable right now. Evidence of that big picture can be seen in the huge ramp up in BHP Billiton's (BHP) plans for capital spending which the company expects to increase 63% this year with another massive increase in 2011 from 12 billion to 20.8 billion dollars. Rio Tinto (RTP) announced a doubling of capital expenditures to 5 billion for 2010 from an original plan of 2.5 billion. Both companies operate heavily in Western Australia where AYSI is dominant. BHP happens to be one of AYSI's major customers having recently inked a 5 year deal that is expected to be worth 50 million dollars or more. Other miners are also planning similar aggressive spending programs. This directly benefits AYSI.
The micro picture for AYSI is more favorable than ever. The company makes a product that lasts longer than its competitors for roughly the same price. That is disruptive to what today is a small and fragmented industry and the company's excellent gross margins are evidence of that. Demand was so strong for the new plate that the company maxed out their production capacity within weeks of opening their second mill in August. The company now has plans for a third and fourth mill. AYSI should be able to leverage their excellent margins and strong expense control into significant earnings when that new capacity comes on-line. It is worth noting that recent investments on their cash flow statement suggest this expansion is in progress
In their most recent quarter, AYSI produced record sales of 5.8 million dollars up roughly 200% YOY in a seasonally weak quarter. Q4 is when the company does their annual shutdown and maintenance. Those sales resulted in record quarterly EPS of .087/share and cash from operations of 2.6 million dollars or .15/share. It’s no surprise the share price hit a recent 52 week high of 3.15/share. If you extrapolate those numbers out for a year you would have a current P/E under 10 and ebitda under 5 for a company sporting 200% revenue growth, rapidly expanding capacity and massive, exponential eps growth. As usual they have done this with disproportionately low growth in expenses and overhead and have still never diluted a single share in the company’s history.