Concerns about a slowdown in worldwide growth have made for a very turbulent three months in the market. Ironically, after a sharp pullback, some growth stocks are priced to a large discount to their long term value. One such stock is a fast growing maker of lasers, IPG Photonics (IPGP).
"IPG Photonics Corporation develops and manufactures fiber lasers, fiber amplifiers, and diode lasers. Its laser products include low, medium, and high output power lasers from 0.5 to 2 microns in wavelength; fiber pigtailed packaged diodes and fiber coupled direct diode laser systems; high-energy pulsed lasers, multi-wavelength and tunable lasers, and single-polarization and single-frequency lasers; solid-state lasers; laser diode chips and packaged laser diodes operating at 9XX nanometers; and high power optical fiber delivery cables, fiber couplers, beam switches, chillers, and accessories." (Business description from Yahoo Finance)
7 reasons IPGP is a good long term growth play at just over $42 a share:
- Despite the 30% pullback in IPGP's stock in the last three months, consensus earnings estimates for both FY2012 and FY2013 have actually ticked up in that time span.
- The company has a robust balance sheet with nearly $370mm in net cash (around 15% of market capitalization) on its books.
- IPGP is expected to grow revenues in the 16% to 18% range for both FY2012 and FY2013 and the stock has a projected five year PEG of under 1 (.64). It also has grown EPS at a 34% annual clip over the past five years.
- The ten analysts that follow the stock have a median analysts' price target of $66.50 a share on IPGP, 50% above the current stock price.
- The company grew operating cash flow by approximately 70% from FY2009 to FY2011 and continues to show impressive cash flow growth in FY2012.
- The stock is selling near the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF.
- IPGP is priced at around 13 times forward earnings, half its five year average (26.4).
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IPGP over the next 72 hours.