OYO Geospace Corp.: Finding profit underground
OYO Geospace Corp. (Nasdaq: OYOG)
Houston, Texas
http://www.oyogeospace.com/
52-week low / high: $47.90 / $110.47
Shares Outstanding: 5.89 million
Market Capitalization: $316 million
You don’t have to dig deep in order to find out why OYO Geospace Corp. (Nasdaq: OYOG) is a good bet. The Houston-based maker of scientific instrumentation and equipment used by the global petroleum industry to acquire more seismic data has been increasing both profit and revenue and is expected to continue on an upward trajectory.
“We have just reported the best annual financial performance in our company’s history,” beamed president and CEO Gary Owens when OYO Geospace announced its results for the fiscal year ended Sept. 30, 2007.
The company, which has about 1,200 employees across five locations in Canada, England, China, Russia and the United States, ended its fiscal year on Sep. 30, 2007 with net income of $19.6 million, or $3.23 per share, compared with $9.8 million, or $1.64 per share, a year earlier.
Revenues rose 33.18% to $138.1 million from $103.7 million the previous fiscal year.
“Increased demand by oil and gas companies for seismic services fueled increased demand for our seismic exploration products,” Owens said.
Indeed, seismic exploration comprised 60% of OYO Geospace’s revenue in fiscal 2007. With the high price of oil, the company is betting that oil and gas exploration giants will continue looking for new reserves of the precious commodities, driving more business.
Once an oil and/or gas field is found the company stands ready to deploy a deepwater seismic recording system to survey the location and provide detailed information. On its website, OYO Geospace boasts that it has designed, manufactured and deployed the largest such system.
In 2003 it installed a subsea reservoir surveillance system at industry giant BP’s (NYSE: BP) North Sea oil exploration site. The system includes 120 kilometers (74.56 miles) of armored cable, houses 2,504 sensor stations, and covers 45 sq. km (17.37 square miles) of seafloor to monitor all seismic activity in the vicinity of the reservoir in real-time. OYO Geospace claims the technology will help BP recover an additional 60 million barrels of oil.
All the cables, sensors, instruments and other equipment necessary to run the technology are also made by OYO Geospace.
With demand growing, the company recently completed construction of a new 170,000 square foot expansion facility in Houston, including about 13,000 square feet of manufacturing space. The first months of 2008 will be spent making the facility operational so that OYO Geospace can increase the capacity of its existing product lines and introduce new ones.
In September the company introduced a new land seismic data acquisition system called Geospace Seismic Recorder, which can serve both the seismic exploration and seismic reservoir markets. Owens said that production will begin in the second quarter of fiscal 2008.
“With our increased manufacturing capacity, newly engineered products and the increasing acceptance of our proven technologies, we are encouraged about our future prospects given current market conditions,” he said.
Wall Street appears to agree.
Analysts are projecting that OYO Geospace’s profit will rise 11.8% from $3.23 per share in fiscal 2007 to $3.61 per share in fiscal 2008, and then jump 34.1% to $4.84 per share in fiscal 2009.
Revenues are also forecasted to rise, going from $138.1 million in fiscal 2007 to $155.25 million in fiscal 2008, an increase of 12.4%. From there, revenues are set to climb 30.9% to $203.2 million in fiscal 2009. That would be a 279% improvement over the company’s fiscal 2005 revenues of $72.82 million.
With long-term debt steadily declining and total current assets rising over the past three fiscal years, OYO Geospace looks ready for the consistent growth expected by analysts.
Note: OYO Geospace Corp. (Nasdaq: OYOG) is on the “Watch List” of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, OYO displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.
