|All Hands, Landec|
|Tuesday, 19 June 2012 08:18|
Huge EPS growth, low earnings multiple. What more do you need to know?
From time to time, good stocks slip right past me. It almost happened today. Generally speaking, I have shied away from economically-sensitive stocks, but this is a different animal entirely.
Landec Corp. (NASDAQ – LNDC - $7.96) is a materials science company that leverages its proprietary polymer technologies, application development and innovation capabilities to develop and commercialize new products in biomedical, agricultural and industrial markets. Landec has become huge in the food packaging space, where its subsidiaries use it technology for the ubiquitous fresh produce packaging in stores across the country. The Company’s technologies are also used in the biomedical arena, such as ophthalmology, which is a major profit driver. Other applications are in personal care, seed coatings, functional coatings, and specialty adhesives.
The key with LNDC is in the financials and valuation. For FY12 that just ended in May 2012, the Company is expected to earn $0.48, giving it a trailing twelve months multiple of 16.7x. However, the Street forecasts EPS of $0.62 next year. At current prices the stock is trading 12.9x FY13E EPS but, in our view, could trade 20% higher in the near term, and $11-12 long-term. The stock just hit a new high today. It doesn’t trade a great deal so it is subject to price swings. But, in our view, it is a strong valuation play.
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