NVE Corp. clocks robust Q3
NVE Corp. (Nasdaq: NVEC) reported robust third-quarter results after Wednesday’s close driven by increases in product sales and operating margins.
For the three months ended Dec. 31, 2007, the nanotechnology company recorded net income of $1.70 million, or $0.36 per share, a 62% increase over net income of $1.05 million, or $0.22 per share, for the third quarter of fiscal 2007.
Total revenue for the quarter increased 23% to $4.77 from $3.86 million in the 2007 quarter. Product sales increased 25% over the 2007 quarter to $4.25 million from $3.40 million.
“The company would cite that they had a bigger shift in business to sales of products versus contract R&D, but I don’t think that’s the whole story,” David Bayer, head of research at Northland Securities said. “Realistically, one of their key OEM customers that is a medical device company went through an inventory adjustment process and that process is largely done now. That business, which is higher margin, has now picked up for them and will be an important driver going forward.”
Bayer raised his rating on the stock to “outperform” from “market perform” today largely as a result of the company’s OEM customer.
Peaking into the fourth quarter, Bayer says an almost 10% increase in inventories on the balance sheet suggests that the company is building up to meet product demand it foresees in the coming quarter.
“They opened up two new distributors and I think there will be some channel growth,” Bayer said.
On the macroeconomic front, Bayer thinks the company should wade any slowdown fine.
“The future in the short run of the company’s performance — whether good or bad — is largely within their grasp as opposed to being driven by macroeconomics,” said Bayer. “Although, the company does two-thirds of its business with industrial type customers, which in general are all economically sensitive, when you’re that small of a company, your product cycles are more important in general than what’s going on in the broader economy.”
Broadpoint Capital analyst Avinash Kant also raised his rating on the stock to “buy” from “neutral.” Sequential growth in product revenues and strong margin performance led Kant to raise his estimates for 2008. The analyst raised his fiscal year 2008 earnings estimate to $1.41 from $1.30 and tacked a price target of $33 on the stock. The consensus of four analysts surveyed by Thomson Financial is for earnings of $1.31 per share for fiscal 2008.
“We believe the company is well positioned for growth in calendar year 2008 and beyond,” Kant wrote in a research note today.
Shares of NVE Corp. (NVEC) shot up 39.24%, or $7.95, to $28.21 at 3:37 p.m. ET. Shares of NVE Corp. have been trading in the range of $19.50 to $41.95 for the past 52 weeks.
