LSI Industries Inc. (LYTS) is a great turn around story, climbing to a Zacks #1 Rank (Strong Buy) on the most recent earning announcement.
Growth rates are through the roof as the company begins to reap the benefits of its new strategic initiatives. Shares are at multi-year highs but still trade with solid multiples.
Company Description
LSI Industries is an “Image Solutions” company that focuses on LED technology for lighting and graphics. The company designs and makes products for the commercial and retail markets as well as niche applications.
Crushed Expectations
On Sep 21 LSI Industries reported first-quarter results for fiscal 2011 that showed an 18% jump in revenue, to $80 million. Operating income almost tripled to $6.6 million, producing EPS of 18 cents.
The Zacks Consensus Estimate was just 4 cents, giving LSI Industries back-to-back surprises. Comments from the company’s CEO were bullish.
LSI Industries had been in the process of reworking its long-term strategy and he said “we are now beginning to reap the benefits” of those efforts. He also mentioned, “Looking forward we are optimistic about our continued growth in solid-state LED lighting.”
Estimates Light Up
Following the release, the full-year Zacks Consensus Estimate more than doubled, to 35 cents from 17 cents. Next year’s estimates are averaging 49 cents, up 16 cents since the report.
Given the 12 cents earned in fiscal 2010, the growth rates are fantastic, with 192% this year and another 39% in fiscal 2012.
Shares of LSI are trading in-line or better in the key valuation metrics. Most notably is the price to sales ratio, given the company has a market cap of roughly $200 million. At 1.2 times LSI is well ahead of its peers, which average over 1.8.
The Chart
The stock jumped to a multi-year high on the earnings news, and maintained that level thanks to the subsequent estimate revisions. As long as LSI can stay above the previous highs, investors should not have too much trouble jumping in, even after the spike.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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