A SmarTrend press release lists Ceradyne as the second of the five highest-growth businesses in the aerospace and defense industry based on expected EPS growth rates. According to the press release, “The long-term growth rate is the expected annual increase in operating EPS over the next three to five years.”
In an earlier post Ceradyne execs, Joel Moskowitz and Tom Cole, sum up Ceradyne’s approach to building the business.
From the press release:
Ceradyne (NASDAQ:CRDN) EPS is expected to grow 309.4% year-over-year, better than the company’s long-term growth rate of 16%. Based on the forward P/E of 8.7x its PEG ratio is 0.54, which signifies a discount in value relative to growth.
The other four high-growth companies in this sector are Aerovironment (1950%), DigitalGlobe (220%), Textron (209%) and LMI Aerospace (85.2%).
Certainly, potential investors need to look deeper than projected EPSs, P/Es and PEG ratios and root around in Ceradyne’s value chain, but they seem to be able to display both long-term strengths in the armor fabrication business and know how to leverage their hot pressing and powder processing skills to other fields.
Still, in their core business, Ceradyne does well and gains lots of admirers because its the beneficiary of recent announcements, such as:
- (today) $6.9 million armor order from the US Special Operations Command;
- (late September) a new three-year Indefinite Delivery/Indefinite Quantity contract for Enhanced Small Armor Protective Inserts plates from the US armed service, with a $127 million initial delivery order;
- (early September) $9.5 million order from its Diaphorm subsidiary for its “Seamless Ballistic” helmet components; and
- (mid-July) order for approximately $36.2 million for ESAPI plates.
Undoubtedly, Ceradyne has a unique and sustainable competitive advantage, but it’s unclear if its a true bargain for investors. I suspect that if there was a bargain to be had this year, it was a month ago when the company itself—which should know best about its current and future value—announced a stock repurchase.