CRPB--This was an interesting analysis which I was surprised to see not posted here
<<Cerprobe (Nasdaq: CRPB) stock popped more nearly 39%, to $18 in the month following the end of its second quarter (June 30). Record sales and better-than-expected earnings would be enough to make Cerprobe a great stock for value-oriented investors. However, management's clear strategy of expansion and product enhancement makes the company more illustrative of a growth company.
On July 17 the company reported that net income for the second quarter (ended June 30) rose 84% to $1.6 million compared to $861,000 in the year-ago quarter. Earnings jumped 60% to $0.24 per share, compared to $0.15 in the second quarter last year. Earnings for the quarter surprised Wall Street by $0.07, crushing analysts' expectations of $0.17 by 41%. Revenue increased 93% to $18.7 million, primarily from acquisitions.
Based in Tempe, Arizona, Cerprobe makes equipment for semiconductor-industry integrated circuit (ICs) testing, enjoying over 40% of the American market. Clients include Intel, Motorola, Texas Instruments, and IBM. Until recently, the Cerprobe product line consisted of IC probe cards and automatic test equipment (ATEs). The acquisition of ComputRoute, Inc. late in 1996 allowed the company to expand its services to include more sophisticated ATE's that can be used in the testing of multilevel printed circuit boards primarily used in semiconductors.
Cerprobe now also retools wafer probes through its Silicon Valley Test & Repair (SVTR) unit, acquired in January. The company bore the cost of relocating SVTR's manufacturing operation to Arizona from California in order to leverage the technological resources at its corporate headquarters and also to take advantage of Arizona's lower manufacturing costs. Combined second-quarter sales from the two newly-acquired units totaled about $4.6 million, a 16% increase over first-quarter revenue.
The acquisitions may have extended Cerprobe's product line, and the relocation of SVTR may improve the company's manufacturing efficiency over time, but the immediate effect of the actions have been to fray the company's margins. Operating income rose to $2.6 million from $1.5 million in the year ago quarter, but the company's operating margin dropped to 13.7% of total revenue from almost 16% last year. Gross profit accounted for 41% of revenue, down from almost 47% last year.
These declines look to us like short-term growing pains. Cerprobe's total long-term debt of $1.6 million is only 7% of shareholder equity. The company has a comforting quick ratio of 1.0, and assets outweigh liabilities by a current ratio of 1.6. And at the end of the second quarter, free cash flow stood near $1.9 million, or $0.29 per share.
As long as the chip market remains strong (and industry reports indicate expanding orders from Europe and Asia), Cerprobe looks to be in good shape to continue to grow revenue 25% a year.
Trading at a recent $17.13, CRPB is trading at 19 times the $0.89 per share Debra Fiakas, an analyst with HD Brous, expects in 1997. Fiakas rates the stock a "buy", and expects earnings of $1.18 per share in 1998, yielding a current multiple of 14.5 times forecasts. We believe Cerprobe has the realistic potential to earn $1 per share. A conservative multiple of 20 implies a stock price of $20 by year-end. Over the longer horizon, the same multiple applied to earnings of $1.20 could bring a price target of $24 in the next 12 months. >>
individualinvestor.com
CRPB was featured in individual investor as "microcap of the month" in the January issue (page 22) |
