The upside looks pretty good from here...
Ault, Inc. (AULT) March 1998 - Current price: $4.8125 bid
smallcapinvestor.com
AULT'S FIRST QUARTER EARNINGS BEAT ESTIMATES BY 83%
On July 22, after reporting fourth quarter earnings, the president of
AULT said that "fiscal 1999 is expected to be a stronger year for
Ault, reflecting anticipated contributions from important new
initiatives in the networking, ASDL modem, wireless communications and
medical markets. Since shipments of power supplies for several of
these significant new programs are scheduled to commence later in the
fiscal year, the Company currently expects only a moderate profit
improvement in the first quarter of 1999 in comparison to the
year-earlier period. At this time, the second half of fiscal 1999 is
shaping up as a significantly stronger period than the first six
months."
Based on that statement, I was expecting first quarter earnings of
perhaps $0.03 or $0.04, compared to $0.02 in last year's first
quarter. And the one analyst estimate listed on Zacks was for $0.06.
But earnings turned out to be much better than that. On Wednesday,
AULT reported net income of $475,000 or $0.11 share for the first
quarter of fiscal 1999 which ended on August 30. And net sales
increased 20% to $11,337,000, from $9,423,000 in the comparable period
of fiscal 1998.
According to the press release, sales of switching power supplies to
OEMs of new-generation cable modems generated a substantial portion of
AULT's first quarter sales growth. However, virtually every other
sector of the company's business met or exceeded budgeted sales
levels, including switching power supplies for medical equipment.
Reflecting the shift in the sales mix toward higher-margin switching
power supplies, the first quarter gross margin rose to 27.0%, from
23.4% in the year-earlier period.
Frederick M. Green, president and chief executive officer, said cable
modem OEMs have largely solved the infrastructure and
installation-related problems that impeded sales of this high-speed
data communications product over the past 12 to 18 months. As a
result, he continued, shipments of switching power supplies for cable
modems appear poised to start meeting the aggressive growth forecasts
of Ault's customers. Green added that the sales mix shift toward
switching power supplies and resulting margin expansion clearly
indicate how the Company is positioned to benefit from the growth of
its targeted data communications, telecommunications and medical
markets. Green also said that the strong first quarter operating
results strengthen his belief that Ault is on track toward posting
solid sales and earnings growth for the first half and all of fiscal
1999.
AULT shares jumped 33% on the news but still appear to be extremely
undervalued. AULT shares had been hit hard in recent months and even
with this gain, they still have to gain another 70% to get back to
their 1998 high.
Press release: newsvest.com
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