Pat,
Here is the Citizen story from today.
JDS growth train still on track
Fibre-optic specialist beats estimates, delivers record fourth quarter
James Bagnall
The Ottawa Citizen
JDS Fitel: Fiscal revenue and earnings: Revenue - $227.2 million, Earnings - $47.6 million
JDS Fitel Inc. turned in another stellar quarter yesterday, firmly establishing itself as one of this region's most consistent growth companies.
The Nepean-based manufacturer of fibre-optic components recorded a 67-per-cent surge in net profits to $13.9 million, or 17 cents a share, in its fourth quarter ended May 31. This compares with $8.3 million, or 11 cents a share, for the year-earlier period.
It also marks the seventh straight quarter in which JDS profits have topped a very healthy 20 per cent of sales. This is a record unmatched by any publicly traded firm in the Ottawa region.
Fourth-quarter sales were also robust. They jumped 65 per cent to a record $66.9 million from $40.6 million a year earlier. JDS exceeded the mean estimate of 16 cents a share of four analysts surveyed by IBES Inc. The fibre-optic technology specialist also blew by analysts' revenue projections.
"JDS is in a great market and executing its game plan very well," said Kevin Slocum, a financial analyst with SoundView Financial Group. "There is nothing in these results that would swing me away from my earlier recommendations."
Mr. Slocum is one of the few U.S.-based analysts to track JDS, which trades only on the Toronto Stock Exchange. He issued a "buy" recommendation last month when JDS shares were trading at $26.75 and predicted they will reach $38 by next June. JDS shares closed yesterday at $28.40, up 80 cents. The company released its quarterly results after the markets closed.
The strong fourth quarter contributed to a record financial year for JDS. Net earnings were up 112 per cent to $47.6 million, or 62 cents a share, while revenues jumped 98 per cent to $227.2 million in fiscal 1998.
Growth was strong in all three of the company's main operating units. Sales of fibre-optic components, used to increase capacity in large telecommunications networks, were up 111 per cent from fiscal 1997. JDS also makes instruments that measure the performance of fibre-optic products. The division that produces these also reported a 111-per-cent jump in revenues.
The company's resale unit, which distributes various products made by third parties, was comparatively anemic, recording a 41-per-cent increase in sales. This division accounts for less than 15 per cent of company revenues and therefore had a relatively small impact on the final growth numbers.
One of the big puzzles about JDS, at least as far as investors are concerned, is why its share price has drifted of late. After peaking at $31.67 last Oct. 14, JDS shares have sagged. They've been trading mainly between $22 and $28, showing little sign of resuming a steady upward trajectory.
Part of the explanation lies with the company's pattern of growth. Year-over-year revenue increases peaked at 139 per cent in the first quarter, and this has proved a tough act to follow. To a certain extent, JDS is falling victim to the law of large numbers --Ethe greater its size, the more difficult it is to sustain rapid growth. And from the first to the fourth quarter, the company's year-over-year sales momentum slowed by half.
This sort of pattern is true of all fast-moving technology firms, but the swings for JDS have been especially pronounced. Yet, even though growth rates are likely to continue falling, Mr. Slocum does not view this as cause for concern.
The SoundView analyst predicts JDS sales and earnings will improve by 35 per cent to 45 per cent annually "over the next few years" --Ea pattern that would produce a $625-million-per-year giant by fiscal 2001.
The fiscal 1998 results provide a good base for getting there.
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