January 31, 2013 at 06:30 AM EST
Constant Growth in Emerging Growth Technology Companies
Constant Growth in Emerging Growth Technology Companies

Small-cap IEC Electronics Corp. (NYSE: IEC) provides custom manufacture of circuit cards, system level assemblies and a host of custom cable and wire harness assemblies. The company garnered the number six spot on Forbes coveted Best Small Companies in America list in 2012. It has been something of an American success story having carved a niche for itself in the printed circuit board industry. The company was on the verge of going under when W. Barry Gilbert was named as acting CEO in 2002 after losing its chief customer. Since then sales have maintained a 35 percent annual growth and Gilbert is now onboard on a permanent basis. IEC has made lucrative acquisitions in the past several years that have added to its growth potential; however this is not a debt free company and it has come under fire for going into debt in order to fund the acquisitions. IEC announced last week that it has amended its credit facility with Manufacturers and Traders Trust Company in order convert part of its long term and revolving debt to term loans with fixed rates. This will also lower the interest rate range on existing and new advances. In addition, maturity dates on existing loans will be extended.

 

IEC also provides electronics manufacturing services on a contractual basis. It serves a number of sectors in this capacity although there was a significant shift in fiscal 2012 when compared to 2011.  Military and Aerospace, which accounted for 56 percent of total revenue in 2011, dropped to 43 percent this past year. Gilbert attributed the loss to governmental funding delays that were experienced for the majority of the year. Industrial and Communications contracts, which accounted for 13 percent of total revenue in 2011, jumped to 25 percent in 2012. Client base in the Medical sector remained firmly entrenched at 21percent of total revenue year-over year.

 

On the whole Earnings estimates continue to trend upward. For 2012, the Zacks Consensus Estimate increased 1.3 percent to $0.76, translating to a year-over-year growth of 33.3 percent. In 2013Zacks projects an increase of $0.85, up 2.4 percent. This reflects a year-over-year gain of 11.2 percent. The company has a market cap of $64.14 million and shares are trading at $6.45. 

 

The company faces competition from the likes of Flextronics International Ltd. (NASDAQ: FLEX), Benchmark Electronics Inc. (NYSE: BHE) and Plexus Corp. (NASDAQ: PLXS). PLXS traded down last week at 0.41 percent hitting $26.47. The company has a 52-week low of $19.63 and a 52-week high of $38.37. The stock’s 50 day moving average is $24.7. PLXS has a market cap of $922.2 million. Flex reported third quarter 2013 adjusted EPS of $0.22, ahead of the Zacks Consensus Estimate of $0.18. The company has a market cap of $4.27 billion and is trading at $6.44. BHE has a market cap of $983 million with shares going for $17.73. 52 week range shows a high of $18.87 and a low of $12.24.

 

Despite the competition from larger companies and criticism over debt load, IEC is positioned for significant growth in fiscal 2013.  Because of the “avoidance” of the fiscal cliff, the government contract sector of the business should not be an issue this year. The company has a solid business strategy and has shown consistent growth since at least 2007.  As with any addition to your portfolio, we recommend researching the company to see if it fits in with your investment strategy.

 

 

 

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