I recently read a book about the thriving technology industry and venture capital space in Israel. They emphasize start-up technology firms there and take pride in having an entrepreneurial culture that fosters technology growth companies. I did some digging and found a U.S.-listed stock that is a perfect example of said Israeli technology prowess. It is worth looking into further. The company is called Nova Measuring Instruments (NVMI).
The company engages in the design, development, production, and sale of integrated process control metrology systems and stand-alone metrology systems for the semiconductor manufacturing industry. I don’t have the technology expertise to understand the ins and outs of their industry, but I do know amazing financial numbers when I see them.
Numbers to Die For
NVMI has no debt on its balance sheet, yet an amazing 41.8% ROE. That means that management is ultra-efficient and is in great hands. Both its profit margin and operating margin is in the 22-23% range, which is also excellent. It also reported healthy operating cash flow of over $21 million over the past year.
Last week, the company received $10 million in orders from a major foundry for its metrology products. CEO Gabi Seligsohn was obviously pleased and stated that the foundry segment plays a crucial role in fast growing end markets such as tablet computers and smartphones. That is great news as these markets should continue to post strong growth in the near future.
The company’s earnings results have been awesome recently as well. It has posted an average surprise of 35% over the past three quarters. Only two analysts cover the stock, but the consensus estimate for 2010 has increased eight cents to 82 cents per share over the past two months. NVMI is only trading at 8.5x next year’s earnings. It might deserve a bit of a discount given its size and the fact that it is international, but I think the stock could hit $12 over the next year.
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