IPG Photonics Corporation (NASDAQ:IPGP) had slightly lower margins YoY, but management clarified that this was because they constantly seek lower costs for customers as they work to lower manufacturing costs, which in turn should accelerate uptake of its product. The company also gives volume discounts for very large orders. IPG Photonics has only been in my portfolio for a couple years, and I want to make it a more serious relationship, with more money and a longer term perspective.
Pick a number
As always, once a company is identified, valuation is the back half of the decision to invest, and can be the harder part of the equation. IPG Photonics Corporation (NASDAQ:IPGP) has a tad pricey 20 times trailing P/E, but it has other compelling metrics, like a 25% Return on Equity, 17% Earnings Growth YoY, about $350 million in cash, and 18% insider ownership.
Compare this with competitor Rofin-Sinar Technologies (NASDAQ:RSTI)‘s ROE of 7% and earnings growth of negative 8%, or Coherent, Inc. (NASDAQ:COHR) with an ROE of 9% and earnings growth of negative 7%. While these companies have different strengths, fiber lasers are making some of these competitors’ technologies distinctly obsolete. It should be no surprise that these competitors highly tout the development of fiber laser products in their annual letters. Fiber lasers are taking market share in a widening array of existing and greenfield markets, and as far as I can tell, the competition is playing catch-up in terms that can be measured in years, not months.
The article Earnings Calls Checkup: One Thesis Undone, Another Going Strong originally appeared on Fool.com and is written by Anthony Reilley.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.