Back in early to mid February I wrote up a recommendation on Zoltek Co., Inc. (NASDAQ: ZOLT). ZOLT is a world leader in the manufacturing of carbon fiber materials. Sounds boring until you realize the applications for carbon fiber are many. Carbon fiber is a lighter, stronger material, therefore energy efficient. In the dawning of the green era, any substance that can conserve energy and improve products is a win-win.
Applications for Zoltek's products are in aerospace, wind turbine blades, sporting goods, automobile bodies, etc. You get the picture. The only factor holding back ZOLT is capacity constraint. The company is frantically building capacity as its product is all spoken for through the end of 2007. The company will not comment on 2008, but some who are close to Zoltek feel 2008 supply is also spoken for. Nice problem to have.
Zoltek has been a volatile stock: It began the year in the low $20s and is now at $35. RBC Capital markets just moved its price target up to $45 for 2007. Members to my Investors Insights club have been reading about ZOLT from me since last September and I have published a price target of $40 for this year.
This is a big idea. Zoltek has a current market capitalization of $950 million. The company is beginning to appear on a lot of portfolio managers radar screens and it is going "mainstream". Some feel ZOLT can be a $5 billion market cap name within 2-3 years. From there, the potential is still enormous as carbon fiber manufacturing is a high barrier to entry industry.
Zolt finished fiscal year September 30, 2006 with a $95 million revenue base. The CEO, Zsolt Rumy ( I know, I know!!) has publicly stated the revenue goal of $500 million for fiscal year 2009. Ambitious numbers coming from a $95 million base, but possible. Earnings per share growth is also explosive. September 30, 2007 consensus is for $0.70 per share going to $1.49 for September 2008. Pricing power is not an issue for ZOLT either -- customers will pay for timely delivery.
Although the stock is up some 75% for the first quarter, investors have not missed the opportunity for big gains in ZOLT. This stock could be a 4-5 bagger in the next 2-3 years...
Georges Yared is the chief investment strategist for Yared Investment Research
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