Balchem: Small Company, Big Profits

| About: Balchem Corporation (BCPC)

Chart forBalchem Corp. (NASDAQ:<a href='' title='Balchem Corporation'>BCPC</a>)

Every once in a while there are stocks that perform so well, one begins to wonder why it is not owned by more investors; Balchem Corporation (BCPC) is one such company. Balchem is a specialty chemical company that manufactures and develops specialty ingredients for the food, pharmaceutical, and nutritional industries. When I first looked at the stock of this company I could not believe the chart, I mean this stock has given investors a 300% return for the last five years, not a bad return for a company that is not in a sexy industry like tech. I began to look at the numbers and what I have found led me to realize that this is a great long-term play. Let's look at Balchem's numbers:

  • Market capitalization: $1.1 billion.
  • EPS Growth annualized for five years: 22%.
  • Revenue: Increased from around $100 million in 2006 to over $255 million in 2010. Revenue is estimated to reach around $300 million by the end of 2011.
  • Cash: Increased from $5 million in 2006 to over $100 million ending this latest quarter (September, 2011).

The numbers above do not lie, and we should not forget that Balchem achieved these results during a recession. The company just reported earnings on November 2nd, and the good news continues, for the third quarter ending September, 2011, Balchem recorded net earnings of $10.8 million which was a record, this was an increase of 27% over the prior year quarter also ending in the month of September. When comparing revenue on a year over year basis for the same quarter we see that the company reported sales of $74.4 million which was an increase of 16.5% above the $63.9 million that was reported in the same quarter in 2010.

Balchem beat the average estimate for EPS of 34 cents and should easily reach $300 million in revenues this year. Next quarter estimates range between 33 and 37 cents on revenue of $76 million; I am feeling pretty good that they will top these estimates.

As for the stock, it has had been trading in a range of $34 to $38 since late September, but has just rallied past its 50-day moving average after earnings. I think this stock wants to trade back to its all time highs near $47, but this stock is more of a long-term play - a stock that you can hold for another five years.

Disclosure: I am long BCPC.

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