Genrad is trading at a 27% discount PE multiple compared to its industry average of 20.0X. That with solid earnings potential makes this stock a strong buy in my mind.
Plus, a 2 million share buyback will be propelling this stock into the low 20's based upon Genrad's low daily trading volume. I would not be betting the farm on Genrad winning the Ford WDS contract. There is a lot of competition and WDS is not a sure thing yet. Investing in Genrad based upon WDS would be speculative.
However, whoever does win WDS (if it is awarded) should be able to generate easily over $200 million in revenue. $300 million may be within reach as well, but $500 million is not what I would calculate.
Ford has roughly 18,000 dealerships worldwide (and growing with its expansion into emerging markets). Jaguar has about 635 worldwide dealerships and Mazda has a little under 4,000. Mazda's diagnostics are gurrently supported by Ford Motor Company, so there is a very, very good chance that this will continue with WDS.
WDS hardware sales should be somewhere between 20,000 and 30,000 units. Add hardware warranty, language translation, software updates, training, etc. and you can see the potential. I don't know how WDS would impact Genrad's FDS2000 income, though, if they were to win.
If Hickok were to win the contract, then I could see their stock tripling. But if they don't win, I could see them on the verge of ruin. Have you ever seen the spread between the bid and ask on Hickok (HICKA)? (3 points) Would take a lot of guts to buy that stock. |
