Dynamic Materials Revisited: Business still booming
Editor’s note: This week we’re revisiting some of the companies that were profiled in this space earlier this year. This update is based on a July 16 article by Shannon Roxborough, “Dynamic Materials: Business is booming.” At the time, Dynamic Materials had just set a new 52-week high at $40.24. On Friday the stock closed at $62.87, not far from the current high of $66.30 established Nov. 30.
When we first wrote about Dynamic Materials Corp. (Nasdaq: BOOM) on July 16 we observed the maker of explosion-welded clad metal plates was experiencing strong growth and was poised for more of the same.
Five months later, the Boulder, Colo.-based company continues to expand its business and outpace Wall Street’s expectations.
During the third quarter ended Sept. 30, Dynamic Materials reported that net income increased an impressive 93% to $7.1 million, or $0.58 per share. Six analysts polled by Thomson Financial were calling for earnings of $0.50 per share. A year earlier, net income was $3.7 million, or $0.30 per share. Revenue also increased, rising 69% to $42.1 million, from $24.9 million during the third quarter of 2006.
“The widespread push for new industrial processing capacity continues to drive significant investments in capital equipment, and based on the broad spectrum of domestic and international projects we are tracking, it appears this activity could continue for the foreseeable future,” president and CEO Yvon Cariou in a statement.
Dynamic Materials, which has production facilities in United States, France and Sweden, saw growth in both its divisions – explosive metalworking and welding.
The explosive metalworking segment, which provides steel plates to a number of industries, saw third-quarter sales jump 72%, while the welding segment, which provides welding services to the ground-based turbine and jet engine sectors, reported a sales increase of 32%.
In a move to boost its market share in the oil and gas services industry the company announced on Nov. 16 that it has paid approximately $96.6 million for the purchase of privately-held DYNAenergetics. The Germany-based company, which had sales of $73.3 million in the fiscal year ended Sept. 30 2007, manufactures clad metal plates as well as various detonators and explosives used in the oil field industry.
So, what does the future hold for Dynamic Materials?
Wall Street expects the company to end the year with a profit of $2.02 per share, 18.8% above its 2007 earnings of $1.70 per share. Revenue is expected to jump 36.9% to $155.42 million, from $113.5 million a year ago.
When looking at the numbers, savvy investors should keep in mind that Dynamic Materials has a history of beating expectations.
In fact, the company’s fast growth may have been too much for some.
On Nov. 30 S&P Equity Research downgraded the stock to “hold” from “buy,” citing its high price.
“The shares have exceeded our previous $58 target price,” analyst R. Tortoriello wrote in a research note. “With shares now at 26 times our 2008 EPS estimate, above our 3-year projected EPS growth rate of 20%, we view BOOM as fairly valued.”
Tortoriello nevertheless said that he expects Dynamic Materials to continue to enjoy high demand from its primary markets and raised the stock’s 12-month target price to $66 from $58.
The company’s future still looks more like a boom than a bust.
