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I’m in need of a stock that is going to explode the earnings in my portfolio.
Time for earnings to bloom
So the market doesn’t sweep me away with its broom
Sub-prime mortgage mess foretells doom
Steam out of my ears as I start to fume
Just when I think I am starting to groom
Weave another winner in my market loom
Strut like a peacock with my plume
And cut a fart that makes the dog leave the room
$$$MR. MARKET$$$ picked great stocks coming from the womb
With earnings over the past 10 years that did indeed zoom
So that all the meats and cheeses I did consume
We’re on track….cover your ears, here comes the BOOM!
Today I bought Dynamic Materials Corporation (BOOM) at a price of $55.20 per share. I will sell it in 4 – 6 weeks at $63.69.
Here is why I love BOOM:
BOOM’s stock price is up 115% and its PE is only 28. Look at this amazing chart. The stock is up over 40% in 3 months thanks to a great third quarter earnings report. Earnings jumped almost 100% compared to the same quarter the previous year, going to 58 cents a share vs 30 cents. It looks like I may have even caught it on a dip…hurray for me:
Dynamic Materials Corporation provides explosion-welded clad metal plates and welding services. The Explosive Metalworking segment offers explosion-welded clad metal plates for use in applications in various industries, including upstream oil and gas, oil refinery, chemical and petrochemical, hydrometallurgy, aluminum production, shipbuilding, power generation, and industrial refrigeration. Go ahead, name me one of these businesses that isn’t going crazy right now. That’s right…uh huh….BOOM! The company offers exposure to rapid sales, earnings per share and cash flow growth. The company uses more than 30,000 pounds of explosives a day. Yep…BOOM!
Explosion Welding (EXW) is a solid state process where welding is accomplished by accelerating one of the components at extremely high velocity through the use of chemical explosives. This process is most commonly utilized to clad carbon steel plate with a thin layer of corrosion resistant material (e.g., stainless steel, nickel alloy, titanium, or zirconium).
Explosion welding was developed rather recently, in the decades after World War II, but its origins go back to World War I. It was observed that pieces of shrapnel that were sticking to armor plating were not only embedding themselves, but they were actually being welded to the metal. Since the extreme heat involved in other forms of welding did not play a role, it was concluded that the explosive forces that the pieces of shrapnel were being subjected to was the cause. These results were later duplicated in laboratory tests, and not long afterwards, the process was patented and put to use. Pretty wild, huh?
Dynamic Materials has been around more than 40 years, perfecting a technique of using controlled explosions to bond plates of different metals that can withstand heat, pressure and corrosion. Using a process acquired from DuPont, the company bonds difficult-to-fuse types of metal, such as carbon steel and titanium, using explosive powders. The bonded metals are then used in equipment for oil refineries, chemical plants, and navy ships. Efforts to boost industrial capacity in the U.S., China, and Middle East helped swell results last year.
Demand for the company's products has been so great that it doubled capacity at its Mt. Braddock, Pa., facility. They see demand for these products continuing, obviously. Up to 60% of Dynamic's business comes from oil, gas, refining and petrochemicals, which have been strong the past few years. Really? Duh.
Demand for Dynamic's products is being driven by the building of infrastructure in the developing countries such as China, India, Russia, Brazil and the Middle East. Those countries are building chemical plants of all sorts. The demand for oil and energy has led refiners to expand and upgrade plants and for drillers to seek new sources of crude oil, which has also helped fuel Dynamic's sales growth of 46% in 2005 and 43% in 2006. True dat..BOOM is the world leader in explosion clad welding and they don’t have any real competitors to worry about. It’s not like it is easy to build a massive underground cavern, which is what is needed to explode and weld this stuff together.
Dynamic is already established as a dominant global player (35% to 40% share) in a niche industry with extremely high barriers to entry. The company has a strong balance sheet (translation = no debt), good cash flow, and high operating margins. The company also sports an impressive return on equity of 38.25%. Net Profit Margin was 17% last year and should stay at these levels for some time. Current assets are almost 3 times current liabilities.
With a market cap of only $666 million and 12.148 million shares, you’re looking at a stock which will really move with volume. A lot institutions haven't bought it yet as many are required to wait until a stock has a $1 billion market cap before it's eligible for them to buy.
Order backlog is ginormous. At the end of the third quarter, it was $77.1 million compared to $68.5 million a year ago at the same time. U.S. capacity to fill those orders will double with the opening of a Mt. Braddock, PA plant. BOOM will also be adding to top line earnings via acquisition. BOOM acquired DYNAenrgetics for $96.6 million which had revenues of $73.3 million in its latest fiscal year. These new sales will increase revenue by 50% next year. The purchase will mainly benefit BOOM because it took a competitor out of the market and increases capacity. Guess the FTC was asleep, that’s ok, more money for me.
So what moves a stock? Remember the mantra..earnings earnings earnings..and oh what earnings we have:
Sales for the third quarter increased 69% to $42.1 million from $24.9 million in the third quarter last year. Gross margin increased to 34% from 33% in the third quarter a year ago. Income from operations increased 72% to $10.6 million from $6.1 million in the comparable year-ago quarter. Net income increased 93% to $7.1 million, or $0.58 per diluted share, from $3.7 million, or $0.30 per diluted share, in the third quarter last year.
Through nine months, sales increased 41% to $110.0 million compared with $77.8 million in the nine-month period of 2006. Gross margin was 34% versus 35% in the same period a year ago. Income from operations increased 32% to $26.9 million compared with $20.4 million in the comparable 2006 period. Net income through nine months was $17.7 million, or $1.44 per diluted share, versus net income of $14.2 million, or $1.16 per diluted share, in the same period last year.
In 2008, the forecast is for $2.50 a share. For the next 5 years, ANAL-ysts predict 29% a year improvement in earnings, on average on sales that should grow by 21% a year, on average, in the same time period. In the last year, sales went from $113.5 million to $155 million. That’s 28%. Boy these ANAL-ysts can’t even add. With the way that Dynamic’s customers are going flat out, $$$MR. MARKET$$$ expects revenues to be $210 million, which will generate earnings of $2.92 per share.
If you take $$$MR. MARKET$$$’s earnings projection and multiply by the PE that BOOM is presently carrying (2
, you get a stock price of $81.76 which is way past my sell target. And if that doesn’t get anyone excited, check this out:
Given the above earnings and discount rate, BOOM must grow earnings at a rate of 15.0% annually for 10 years to justify its current stock price of around $55.
If we assume initial earnings of $24.1 million grow at a rate of 43.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $965 million. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $3.76 billion. To complete the calculation we add these two figures together, subtract the long-term debt for BOOM ($0), and divide by the outstanding shares (12.1 million) to get a per share intrinsic value of $389.16.
Yes…that’s right, $389.16 for each share, which would make BOOM about a 7 bagger if the market paid it for its intrinsic value. All it has to do is keep making money and earnings are right around the corner. I’m glad I got in on a dip.
But don’t listen to me. Here’s what Mr. Explosive had to say for himself, and his company:
“Strong demand from an array of end markets fueled another quarter of robust sales and earnings growth. The widespread push for new industrial processing capacity continues to drive significant investments in capital equipment, and based on the broad spectrum of domestic and international projects we are tracking, it appears this activity could continue for the foreseeable future. We are optimistic that many of these projects will incorporate DMC's explosion welded plates."
"The new production capacity we have brought on line at our Mt. Braddock facility and the upgrades we are making at our European operations have enhanced our ability to effectively process the considerable order volume we continue to experience. In spite of continued tension in the supply chain for high-grade carbon steel, we are very encouraged by the volume of work our production teams are moving through our three explosion welding production centers." said Yvon Cariou, president and chief executive officer.
Well look, I really have trouble listening to any guy named Yvon. Especially since my favorite TV character was Batgirl, played by Yvonne Craig. I’d rather grab a beer and listen to Pat Travers:
No kiddin'
I'm ready to fight
I've been lookin' for my baby all night
If I get her in my sight
Boom boom! RIGHT HERE! Out go the lights
Those were the good old days. The Pat Travers Band. Ladies and Gentlemen, give them a round of applause.
Please let me know what you thought of this write up. If you liked it, pass it on to a couple of buddies.
I am HUGE!
$$$MR. MARKET$$$
Time for earnings to bloom
So the market doesn’t sweep me away with its broom
Sub-prime mortgage mess foretells doom
Steam out of my ears as I start to fume
Just when I think I am starting to groom
Weave another winner in my market loom
Strut like a peacock with my plume
And cut a fart that makes the dog leave the room
$$$MR. MARKET$$$ picked great stocks coming from the womb
With earnings over the past 10 years that did indeed zoom
So that all the meats and cheeses I did consume
We’re on track….cover your ears, here comes the BOOM!
Today I bought Dynamic Materials Corporation (BOOM) at a price of $55.20 per share. I will sell it in 4 – 6 weeks at $63.69.
Here is why I love BOOM:
BOOM’s stock price is up 115% and its PE is only 28. Look at this amazing chart. The stock is up over 40% in 3 months thanks to a great third quarter earnings report. Earnings jumped almost 100% compared to the same quarter the previous year, going to 58 cents a share vs 30 cents. It looks like I may have even caught it on a dip…hurray for me:
Dynamic Materials Corporation provides explosion-welded clad metal plates and welding services. The Explosive Metalworking segment offers explosion-welded clad metal plates for use in applications in various industries, including upstream oil and gas, oil refinery, chemical and petrochemical, hydrometallurgy, aluminum production, shipbuilding, power generation, and industrial refrigeration. Go ahead, name me one of these businesses that isn’t going crazy right now. That’s right…uh huh….BOOM! The company offers exposure to rapid sales, earnings per share and cash flow growth. The company uses more than 30,000 pounds of explosives a day. Yep…BOOM!
Explosion Welding (EXW) is a solid state process where welding is accomplished by accelerating one of the components at extremely high velocity through the use of chemical explosives. This process is most commonly utilized to clad carbon steel plate with a thin layer of corrosion resistant material (e.g., stainless steel, nickel alloy, titanium, or zirconium).
Explosion welding was developed rather recently, in the decades after World War II, but its origins go back to World War I. It was observed that pieces of shrapnel that were sticking to armor plating were not only embedding themselves, but they were actually being welded to the metal. Since the extreme heat involved in other forms of welding did not play a role, it was concluded that the explosive forces that the pieces of shrapnel were being subjected to was the cause. These results were later duplicated in laboratory tests, and not long afterwards, the process was patented and put to use. Pretty wild, huh?
Dynamic Materials has been around more than 40 years, perfecting a technique of using controlled explosions to bond plates of different metals that can withstand heat, pressure and corrosion. Using a process acquired from DuPont, the company bonds difficult-to-fuse types of metal, such as carbon steel and titanium, using explosive powders. The bonded metals are then used in equipment for oil refineries, chemical plants, and navy ships. Efforts to boost industrial capacity in the U.S., China, and Middle East helped swell results last year.
Demand for the company's products has been so great that it doubled capacity at its Mt. Braddock, Pa., facility. They see demand for these products continuing, obviously. Up to 60% of Dynamic's business comes from oil, gas, refining and petrochemicals, which have been strong the past few years. Really? Duh.
Demand for Dynamic's products is being driven by the building of infrastructure in the developing countries such as China, India, Russia, Brazil and the Middle East. Those countries are building chemical plants of all sorts. The demand for oil and energy has led refiners to expand and upgrade plants and for drillers to seek new sources of crude oil, which has also helped fuel Dynamic's sales growth of 46% in 2005 and 43% in 2006. True dat..BOOM is the world leader in explosion clad welding and they don’t have any real competitors to worry about. It’s not like it is easy to build a massive underground cavern, which is what is needed to explode and weld this stuff together.
Dynamic is already established as a dominant global player (35% to 40% share) in a niche industry with extremely high barriers to entry. The company has a strong balance sheet (translation = no debt), good cash flow, and high operating margins. The company also sports an impressive return on equity of 38.25%. Net Profit Margin was 17% last year and should stay at these levels for some time. Current assets are almost 3 times current liabilities.
With a market cap of only $666 million and 12.148 million shares, you’re looking at a stock which will really move with volume. A lot institutions haven't bought it yet as many are required to wait until a stock has a $1 billion market cap before it's eligible for them to buy.
Order backlog is ginormous. At the end of the third quarter, it was $77.1 million compared to $68.5 million a year ago at the same time. U.S. capacity to fill those orders will double with the opening of a Mt. Braddock, PA plant. BOOM will also be adding to top line earnings via acquisition. BOOM acquired DYNAenrgetics for $96.6 million which had revenues of $73.3 million in its latest fiscal year. These new sales will increase revenue by 50% next year. The purchase will mainly benefit BOOM because it took a competitor out of the market and increases capacity. Guess the FTC was asleep, that’s ok, more money for me.
So what moves a stock? Remember the mantra..earnings earnings earnings..and oh what earnings we have:
Sales for the third quarter increased 69% to $42.1 million from $24.9 million in the third quarter last year. Gross margin increased to 34% from 33% in the third quarter a year ago. Income from operations increased 72% to $10.6 million from $6.1 million in the comparable year-ago quarter. Net income increased 93% to $7.1 million, or $0.58 per diluted share, from $3.7 million, or $0.30 per diluted share, in the third quarter last year.
Through nine months, sales increased 41% to $110.0 million compared with $77.8 million in the nine-month period of 2006. Gross margin was 34% versus 35% in the same period a year ago. Income from operations increased 32% to $26.9 million compared with $20.4 million in the comparable 2006 period. Net income through nine months was $17.7 million, or $1.44 per diluted share, versus net income of $14.2 million, or $1.16 per diluted share, in the same period last year.
In 2008, the forecast is for $2.50 a share. For the next 5 years, ANAL-ysts predict 29% a year improvement in earnings, on average on sales that should grow by 21% a year, on average, in the same time period. In the last year, sales went from $113.5 million to $155 million. That’s 28%. Boy these ANAL-ysts can’t even add. With the way that Dynamic’s customers are going flat out, $$$MR. MARKET$$$ expects revenues to be $210 million, which will generate earnings of $2.92 per share.
If you take $$$MR. MARKET$$$’s earnings projection and multiply by the PE that BOOM is presently carrying (2
, you get a stock price of $81.76 which is way past my sell target. And if that doesn’t get anyone excited, check this out:Given the above earnings and discount rate, BOOM must grow earnings at a rate of 15.0% annually for 10 years to justify its current stock price of around $55.
If we assume initial earnings of $24.1 million grow at a rate of 43.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $965 million. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $3.76 billion. To complete the calculation we add these two figures together, subtract the long-term debt for BOOM ($0), and divide by the outstanding shares (12.1 million) to get a per share intrinsic value of $389.16.
Yes…that’s right, $389.16 for each share, which would make BOOM about a 7 bagger if the market paid it for its intrinsic value. All it has to do is keep making money and earnings are right around the corner. I’m glad I got in on a dip.
But don’t listen to me. Here’s what Mr. Explosive had to say for himself, and his company:
“Strong demand from an array of end markets fueled another quarter of robust sales and earnings growth. The widespread push for new industrial processing capacity continues to drive significant investments in capital equipment, and based on the broad spectrum of domestic and international projects we are tracking, it appears this activity could continue for the foreseeable future. We are optimistic that many of these projects will incorporate DMC's explosion welded plates."
"The new production capacity we have brought on line at our Mt. Braddock facility and the upgrades we are making at our European operations have enhanced our ability to effectively process the considerable order volume we continue to experience. In spite of continued tension in the supply chain for high-grade carbon steel, we are very encouraged by the volume of work our production teams are moving through our three explosion welding production centers." said Yvon Cariou, president and chief executive officer.
Well look, I really have trouble listening to any guy named Yvon. Especially since my favorite TV character was Batgirl, played by Yvonne Craig. I’d rather grab a beer and listen to Pat Travers:
No kiddin'
I'm ready to fight
I've been lookin' for my baby all night
If I get her in my sight
Boom boom! RIGHT HERE! Out go the lights
Those were the good old days. The Pat Travers Band. Ladies and Gentlemen, give them a round of applause.
Please let me know what you thought of this write up. If you liked it, pass it on to a couple of buddies.
I am HUGE!
$$$MR. MARKET$$$
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