ARCW which I have been in and recommended since $8.65, reported super strong results and I contend that this is comparable to PRLB which has a P/E of 60.
ARCW 10-Q Filing
ARCW Earnings Press Release
4 Reasons From These Filings That Shorts Are In Big Trouble
1) Current Results
2) MIM AND 3D Printing ! New 3D Printing comments ! "3D Printing Top Priority Going Forward"
3) Organic growth in the key division was 22% Excluding impact of acquisitions
4) Strong Future Outlook
1) Current Results
ARC GROUP WORLDWIDE, INC. REPORTS RECORD QUARTERLY RESULTS
For the quarter ended September 29, 2013 compared to the quarter ended September 30, 2012 (fiscal first quarter) :
• Net Revenues Increased 38.1%, to $18.4 Million
• Adjusted EBITDA Increased 80.8% to a Record $3.4 Million
• Earnings Increased from a Prior Year Period Loss to $1.3 million
• Adjusted EPS Increased 47.8% to a Record $0.34
Bank Debt Paid Down by 42.2%, or $10.6 Million
2) MIM AND 3D Printing ! New 3D Printing comments ! "3D Printing Top Priority Going Forward"
Mr. Jason Young, Chairman and CEO, said, “I am pleased to report outstanding quarterly results that reflect continued growth in revenue, cash flow, and earnings per share. As the leader in Metal Injection Molding and other niche manufacturing businesses, we continue to focus on building our market position in these areas, both organically and through acquisitions.” He further added, “We are also focused on bringing technology and innovation to manufacturing. We have made good progress utilizing 3D printing and view it to be a key area of future growth for ARC in production and prototypes.”
The Precision Components segment also utilizes 3D printing to provide a more complete solution to its customers. It ’ s applications in the business have increased in the past two years and the Company has committed technical development resources to utilize the technology to dramatically reduce time to market from months to weeks. ARC views 3D printing to be a burgeoning area of growth for the Company, both in production and prototypes. The Company is making 3D printing a top priority going forward, given the strategic fit to the Precision Components product and customer base.
3) Organic growth in the key divisions was 22% Excluding impact of acquisitions
Sales for the Precision segment increased significantly, by $5.2 million or 45.7%, over the comparable prior year period. The AFT Acquisition in fiscal 2013 contributed $2.7 million in additional sales in the first quarter of fiscal year 2014. Excluding the Acquisition’s impact, sales growth compared to the comparable prior year period still increased $2.5 million, or 22.0%. The firearms market segment at AFT continued to grow, as the Company was able to meet increased demand for, and secure several new programs, from their customers in this market segment. In addition, AFT-HU contributed to the sales growth through increased demand related to the automotive turbocharger customers. FloMet saw a slight increase in sales over the prior year quarter as a result of additional production volume in the consumer market segment. Tekna Seal did not experience growth over the prior year period as a large, intermittently recurring order did not occur in the current quarter. However, Tekna Seal did recently receive an annual blanket order from a new customer in the aerospace industry which is encouraging progress.
4) Strong Future Outlook
The MIM businesses received 15 new tools this quarter representing approximately $2.0 million in potential incremental revenue at anticipated production volumes. Additional capacity in AFT-US is also being added to accommodate the continued growth in the firearms market segment for product lines already tooled on which volumes are forecasted to increase as soon as that additional capacity is in place. Further, new firearms business, which was tooled within the last three quarters, is expected to launch in the next two quarters. FloMet received new orders from several medical device customers in the period that will impact revenues later in this fiscal year, including a new customer in China. Separately, we expect continued demand in Europe for automotive turbochargers, which we hope will translate into increased revenues at AFT-HU. Tekna Seal saw positive indications across its markets with orders for new prototype applications having been received. Prototypes typically represent future production orders commencing between one and three years from original submission. In addition, Tekna Seal is experiencing increases in new medical customer orders, prototype and production orders from another aerospace controls customer, and for new development technologies associated with power storage devices. These increases in revenue may however be offset by typical customer attrition, but our goal is to add as much incremental revenue as possible. Finally, the Company believes its continued investment in technology and innovation, specifically those related to automation, robotics, 3D printing and molding, will continue to improve efficiencies and hopefully provide new sources of revenue.
I am long this stock originally from $8.65 and have taken some profit in the $20's and still own some shares. This is not a blog post that I am going to chase this stock today for a new positions after the big move it has made. But for being long like I am from the $8-$12 area there is no reason to me why this stock cannot be compared to a PRLB which has a P/E of 60. Anyone short ARCW after this report in my opinion is in trouble and we could see a big short squeeze today. This blog is not investment advice and please see all disclaimers at the bottom. Chasing low float stocks can be dangerous and risky.
ARC Group Worldwide Inc. (ARCW) is an under followed and under the radar Company. They are a leader in a unique manufacturing niche and like the 3d printing boom, they are experiencing rapid growth, profitability and cash flow from operations. It is my opinion, that the shares are greatly undervalued compared to other growing manufacturing specialty technology companies.
ARC, through its operating subsidiaries AFT, AFT-H, QMT, ARC Wireless LLC, and ARC Wireless Ltd., is a global diversified manufacturer, active in MIM, specialty hermetic seals, flanges and wireless equipment.
ARC's mission is to bring innovation to traditional manufacturing. ARC is focused on building its core manufacturing businesses in precision components, flanges, fittings and wireless equipment. The Company focuses on building these units through organic growth, as well as vertical and horizontal acquisitions. In addition to making acquisitions that are strategic to ARC, the Company evaluates new manufacturing niches that fit into its broader objectives, which are bringing manufacturing back to the US, bringing technology to traditional manufacturing, as well as optimally position the Company within the global manufacturing supply chain.
On October 4th, 2013, ARCW reported fourth quarter 2013 net income of $1.6 million and $3.0 million for fiscal year ending June 30, 2013. The fourth quarter and full year results are driven by improved performance in all of our manufacturing operations and higher sales revenue resulting from the reverse acquisition between ARC and Quadrant Metals Technologies (QMT) and the acquisition of Advanced Forming Technologies, Inc. (AFT) and AFT-Hungary Kft., (AFT-H). ARC also reported adjusted earnings per share (Adjusted EPS) of $0.30 for the fourth quarter 2013 and $0.85 for the fiscal year ending June 30, 2013.
For the fiscal year ending June 30, 2013, the Company's total sales were $68.5 million, growth of 125.3%, or $38.1 million, over $30.4 million in fiscal year 2012. Sales for the fourth quarter ending June 30, 2013 amounted to $19.5 million compared to $7.7 million in the prior year fourth quarter an increase of 153.7% or $11.8 million. Growth in the precision components segment of the Company's business has been driven by increased demand for components manufactured by the Company's three metal injection molding ("MIM") businesses. These three companies, FloMet LLC, AFT, and AFT-H are the pioneers and recognized technological leaders in the industry. MIM is a cost effective method of producing high volume precision metal components and is gaining increasing adoption throughout industries such as medical devices, automotive, consumer durables, defense and firearms. The MIM businesses have had a positive impact on the Company's sales and we anticipate sales to continue to increase as the market demand for components increases. The Company's continuous improvement focus and strategic investments in technologically advanced capital equipment, like robotics and automation, have allowed it to increase efficiencies and reduce costs while also significantly increasing available capacity for growing demand. The Company reported 27% gross margins for the fiscal year ending June 30, 2013 and 28% in the fourth quarter 2013.
Commenting on the recent MIM performance, Robert Marten, CEO of the QMT-MIM division stated, "We now unequivocally have the world leader in MIM and have integrated our three MIM factories into a world class, global MIM operation. We are focused on continuing to provide exceptional product quality and service to our customers, as well as further strengthening our position in the MIM industry by growing our existing operations, vertically integrating and opportunistically evaluating acquisitions."
"We are very pleased to now run the world's leader in MIM and look forward to continued growth in that division," said ARC Chairman and CEO Jason Young. "While we continue to build our MIM division, we are trying to build similar market dominance in our other manufacturing divisions, through organic growth, as well as acquisitions both horizontally and vertically. We are also big believers in US manufacturing, as well as bringing technology and innovation to traditional manufacturing. We have brought significant technology to our various businesses, and view the continued adoption of robotics, automation and 3D printing as key drivers to growth in manufacturing, particularly in the US."
ARCW is the leader in a unique manufacturing process that lowers costs. From their website it states, "For metal injection molded and powder injection molded components, delivered accurately and on time, look to the innovation and service provided by AFT. We have invested in the latest technology to provide cost-effective, efficient, and customized solutions to clients' tooling and quality metal injection component manufacturing needs. Our MIM process is an alternative to investment casting processes, offering a final product with finer detail and greater density, and usually a lower production cost."
The metal injection molded (MIM)_ and powder injected molded markets are both forecasted for big growth, verifying the ARCW forecasted comments.
Read the articles "MIM Surges Forward" and "SciPiVision's Market Study Finds Strong Growth For Powder Injection Molding" to learn more about the growth of these processes.
3D Printing Companies 3D Systems Corp. (DDD), Stratasys Ltd. (SSYS), and The ExOne Company (XONE) are also in a fast growing manufacturing industry that is a unique niche. ARCW mentions 3d printing in their last press release:
"We have brought significant technology to our various businesses, and view the continued adoption of robotics, automation and 3D printing as key drivers to growth in manufacturing, particularly in the US, said ARC Chairman and CEO Jason Young"
DDD has a P/E ratio of 43, SSYS has a P/E ratio of 46, and XONE has a P/E ratio of 112, all based on next fiscal years forecasts. ARCW reported $0.30 in their last quarter and said they anticipate sales to continue to increase. With a conservative extrapolation of last quarters EPS we get a full year $1.20 EPS for 2014 (even though the Company said they expected growth). Applying the 3d printing companies P/E ratio of 44, ARCW should be a $52.80 stock. Even with a traditional growth P/E of 20, ARCW should be a $24 stock. With only 5.7 million shares outstanding, a public float of only 1mm shares, and a Company stock buyback in place, I believe ARCW deserves to double or triple from the $10.10 closing price today based on their strong growth and leadership position in a rapidly growing important manufacturing process.
iPhone 5S Review - Obviously this phone is a big upgrade for iPhone 4s and lower. However, after having the iPhone 5 with the upgrade to iOS7 for a few days and now comparing it to the iPhone 5S, here are a few thoughts. There is the biometric fingerprint sign on with the iPhone 5S, but I am not sure I want to put my fingerprint out there like that anyway. The camera is faster, shoots rapid fire, multiple pictures, and they say the picture quality is better on the front and back cameras. The one major difference that is very noticeable is that the iPhone 5S is lightning fast and the fastest phone I have ever used !! Lastly, they claim the battery life to be improved as well (too early to tell). So if you are contemplating upgrading from an iPhone 4S or lower, the iPhone 5S is likely the most dynamic phone on the market and you will see a vast difference. However, if you have an iPhone 5 currently and must choose between getting the iPhone 5S or waiting for the iPhone 6 next year, I would wait for the iPhone 6.
On August 30th I wrote an article on Digital Ally Inc. (DGLY) titled
"Why Digital Ally Inc. Could Double When Compared To Taser International Inc.".
The stock opened at $10.31 that day and has hit a high of $14.50 and now has pulled back to $12.68 and I think this represents a buying opportunity.
Taser International Inc. (TASR) is getting all of the attention so far in the wearable police camera market. However unlike their taser gun, they have not claimed that their body camera is patented. I contend that they have a significant and capable competitor in DGLY.
One thing that is certain, it looks like the wearable police cameras will eventually become standard equipment for police officers as TASR CEO Rick Smith predicted. All one needs to do is perform a search for news on the subject. Recent headlines include:
Proposal: Equip all police officers with mini video cameras to wear during arrests
Judge Orders New York City Police to Wear Cameras
Police board pushes wearable cameras
In California, a Champion for Police Cameras
Risks to DGLY would be competition, however it appears that they are making progress per the following headlines.
On September 6, George Zimmerman was Caught Speeding In Lake Mary, Florida on FirstVu HD Body Cam made by DGLY.
DGLY is listed as one of two required vendors in recently passed Senate Bill 2125 for North Dakota (note that TASR is NOT the other vendor) :
All - See Appendix F Fiscal Note to Senate Bill 2125: Uniform Electronic Recording of Custodial Interrogations Act: Required Gear a. Lapel Audio and Video Devices
DGLY listed as one of two required vendors for the 1804 police officers in the state of North Dakota for its FirstVu Individual Video Camera
DGLY listed on one two required vendors for its DVM 400 in-car video camera.
The two opportunities cited above would more than double its last quarter's revenue.
Value Reserved for the Individual FirstVU HD Camera is $1,528,835 ($847.48 times 1804)
Value Reserved for the In-car video system is $4,882,827
DGLY has integrated the FirstVu wearable camera with their In-car video system and was the only vendor that was listed as required in both categories. The integration of these systems makes them unique.
DGLY has other products that continue to gain traction as well:
The Mission and Installation Contracting Command Fort Bliss, TX (MICC Fort Bliss) intends to award a sole source purchase order for Advanced Wireless Microphones and Microphone Upgrades to Digital Ally.
Kiefer funds police in-car video systems
As mentioned in my previous article, the U.S. Patent and Trademark Office Allows Two Patent Applications for Digital Ally's Core Product Line. The second patent relates to remote transmitters worn by law enforcement personnel in the field. This patent application covers, among other features, on-board storage of recorded data to insure that no evidence is lost when law enforcement officers are away from their vehicles.
At a market cap of just over $27mm, I contend that DGLY is very undervalued when compared to historical prices and the market opportunity before them. DGLY was at a split adjusted high of $91.28 in 2008 during the Great Recession.
In 2008, DGLY reported EPS of just $0.22 per share. In 2013, DGLY has reported $0.33 in adjusted EPS for the first half of 2013 and said the second half looks promising. In 2008 when DGLY had approximately 15.8mm shares outstanding, analysts had target ranges of $15-$17.50 for the stock. The $17.50 target was based on forecast 2009 EPS of $0.83 and again currently DGLY has done $0.33 adjusted EPS in the first half of 2013 alone. That $15-$17.50 target range with the 15.7mm shares outstanding at the time would have given DGLY a market cap of $237mm-$277mm. Currently with 2.1mm shares outstanding that would mean a current stock price of $113-$132.
The DGLY opportunity reminds me of TASR right before its historic stock price appreciation in 2004 because of their taser gun.
At the time TASR had a small amount of outstanding shares and a great growth opportunity before it just as I believe DGLY has now.
Disclosure: I am long DGLY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Low float stocks can be thin and volatile and risky. I am long originally from the $9's
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