For some companies, success is based in broad diversification. From utility meter reading equipment to acid filters, video surveillance systems, turntables, acoustic test enclosures and magnetically shielded rooms, there is a St. Louis outfit that has you covered.
ESCO Technologies (NYSE: ESE) supplies special purpose communications systems for electric, gas and water utilities, including hardware and software to support advanced metering applications. In addition, the company provides engineered filtration products to the transportation, health care and process markets worldwide and is an industry leader in RF shielding and electromagnetic compatibility equipment. Customers include Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT).
The firm pleased investors last week, when it reported fiscal Q2 EPS of 28 cents and revenues of $129.1 million. Analysts had been expecting 23 cents and $125.7 million. Management also guided FY07 EPS to $1.50-$1.65 ($1.52 consensus) and FY07 revenues to $555-$560 million ($552.56M consensus). In discussing the solid results and favorable outlook, the CEO noted growing backlogs. The six month consolidated book-to-bill ratio was 124 percent, with all segments in excess of 100 percent.
ESE shares popped on the news and subsequently moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with five "strong buys" and three "holds". Analysts see a 48% growth rate, through the next year. The ESE Price to Sales ratio (2.71), Price to Book ratio (3.29) and Price to Cash Flow ratio (16.32) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $40.67 and $58.42. A stop-loss of $43.00 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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