If you’ve never heard of them before, you should take note of them now. IPG Photonics Corporation (Nasdaq:IPGP) develops and manufacture a broad line of high-performance fiber lasers, fiber amplifiers and diode lasers for diverse applications in numerous markets. These are not like the old, bulky, power hungry lasers that were unreliable and maintenance heavy. These are a new generation of lasers that are in high demand in several industries.
Of the 11 analysts who were covering IPG, none officially expected the company to earn more than $0.36 per share in the fourth quarter, but it appears that the company will not only beat those earnings estimates, they will slay them. There has been an enthusiastic response to the pre-announcement by the company but nothing is real to bankers until the audit firms say they are real and that happens later this week.
In the early 1990’s, a group of Russian scientists developed this company’s diverse lines of low, mid and high-power lasers and amplifiers are used in materials processing, advanced, communications and medical applications. The company has grown into an emerging powerhouse that sells their products globally to original equipment manufacturers, system integrators and end users. They have built an effective marketing team that markets their products internationally primarily through their direct sales efforts, but also through agreements with independent sales reps and distributors.
In the end, however, the reason why the company is doing so well, and will likely continue to, is because the product is superior to others in the same space and because they are vertically integrated such that they design and manufacture most of their own key components.
In addition, IPGP is in growing markets (i.e. medical) whose applications and needs for these types of lasers are in higher demand than in the past. Forecasts for the global market in these medical systems alone will compound annual growth rates (CAGRs) through 2014 according to industry reports. Again, remember that this is only in medical applications like Surgical Lasers, Aesthetic Lasers, Ophthalmic Lasers, Diagnostic Lasers, Therapeutic Lasers, and Accessories & Services. The company is selling to several other industries that are projecting the same type of growth.
This is one of the reasons why investors and Wall Street media outlets have become so bullish on the stock in recent weeks. Some analysts expect more positive developments from IPG's shares in 2011, owing to the company's dominant position in the various rapidly growing fiber laser markets and some of these overall steadily improving macroeconomic conditions.
In the short term, I am anticipating that once official and audited fourth-quarter 2010 financial results are presented at conference call later this week, more hedge-funds and institutional investors will buy shares. That should push shares higher still.
I am in agreement with Travis Hoium of The Motley Fool who says that given its improving fundamentals, I think the stock has further still to run. The company’s forward P/E of 35 is a little expensive, but the growth IPG Photonics is experiencing makes this stock worth the price. Investor’s Business Daily and others, like Louis Navellier’s grade the stock among the best on Wall Street. These publications rate winners on strong fundamentals, like sales growth, earnings growth and the like. Their premise is simple: If a company is struggling to sell its products or is spending more than it makes, it’s not a company that you want to own for growth. That certainly does not appear to be the case here.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IPGP over the next 72 hours.
Additional disclosure: I have made changes and sourced everything as you asked.