About the price.
I agree that Gentex's potential growth is worth the risk of a slowdown in the auto market, especially for investors who are willing to stay invested for the long haul through the next cycle in the auto industry. I believe it has the potential to be a multi-bagger in the years ahead. However, I don't see how the current price factors in the risk of a recession, or why it's considered discount now at all.
Last I checked, both First Call and Zacks estimate FY 98 & 99 at .64 & .79. With trailing 12 months earnings at .595, that's 20.8% annualized growth from now till 12-99 [.79/.595 * 1.5sq.rt.] So I calculate the fair price to be about $12.38 [= 20.8 * .595]. I do, however, realize that 6 qtrs. ahead is only a short time to factor in growth. Does anyone know what the '00 estimates are?
Anyway, am I missing something here?
Back to the point about a recession, which will happen eventually. When it does, if Gentex's growth is knocked down 15%, wouldn't it's price be hit at least that much if not much more? Analysts expect 23.5% growth from 98-99. If 15% is taken off growth in that range, Gentex may continue to grow, but not much, especially if the gross and operating margins don't hold up. |
