FLIR Systems: Seeing Clearly

Jul.24.07 | About: FLIR Systems, (FLIR)

FLIR Systems, Inc. (NASDAQ:FLIR) can see through smoke screens. The company's thermal imaging and obscurant-proof camera systems detect heat and radiation, thus allowing operators to see objects through fog, darkness, or smoke. FLIR's imaging products enhance vision for military and commercial applications such as search and rescue, drug interdiction, border patrol, surveillance, navigation, and newsgathering. Industrial customers use FLIR's thermography products, which employ infrared cameras to measure temperatures from a distance for equipment monitoring, process control, product development, and other applications. US government agencies collectively account for about 32% of FLIR's sales.

And sales are booming. In 2004, they were $482.7 million. This year they'll reach $705 million and $805 million next year, if the analysts have the numbers right. Some examples of recent sales: the U.S. Marine Corps ordered $36 million worth of Star SAFIRE III system, to be used in its Ground-Based Optical Surveillance system. Look for a jump of 14% in sales this year.

To keep revenues growing, FLIR is investing in Research & Development for several U.S. military programs. Other areas of increased demand: Thermography and Commercial Vision Systems [CVS]. Thermography is benefiting from a wide range of price points over an array of products. European sales have been improving because of a better international distribution capability. CVS is using the same formula: lower price points over more products to capture more of the security, maritime, aviation and components markets.

Along with solid revenue growth (predicted to be 14% a year, on average, for the next 5 years) is strong profits. In 2004, they were 94 cents a share. Analysts are predicting $1.65 this year and $2.00 next year. Forecasts for the next 5 years show a growth of 16% a year, on average. Net profit margin was 17.5% last year. Look for 18.3% this year and 19.2% next year. Strong profitability is expected from new contracts for the U.S. Army's Armed Reconnaissance Helicopter program which uses the FLIR BRITE STAR laser designation system.

Other numbers: Return on Equity is a heartwarming 25% with expectations of it going to 31.5% next year. Current assets are over 3 times current liabilities. Market cap is $3.1 billion with 66.3 million shares outstanding. Debt is about 32% of the balance sheet. The stock price is at its all time high after it had 2 stock splits in the last 4 years, each 2 for 1.

FLIR Systems has been discovered. There's nothing cheap about it. But there's every reason to believe earnings will ramp even faster in the next few years as more commercial applications along with the military expand the market. FLIR has the international distribution channels in place to take advantage of the new demand.

FLIR 1-yr chart


Disclosure: none