I bought IPGP on the recommendation of a MF service way back in the second quarter of 2008. Since following this board, I wanted to share some research I've done since buying. Quarter
I’m not sure where you were going with this post because it appears that most of what you were going to say somehow got lost. But I am in the same position as you, I bought IPGP based on a TMF recommendation which, as usual for TMF recommendations, did not include a lot of specific financial information. So, I’ve been reviewing all my holdings largely driven by what I’ve learned here and found IPGP to be of particular interest and a company which probably warrants more scrutiny by this community.
IPG Photonics designs, manufactures and sells industrial lasers along with associated amplifiers, fiber optics, power supplies, and sundry accessories. The lasers are used for a host of applications including medical treatment, communications, and other uses but they are most widely employed in material processing. IPGP markets their products directly and also supports OEMs, system integrators. They provide sales and support on a world-wide basis. They are headquartered in Oxford, MA.
First, a word of caution about the numbers I am about to post. Saul has repeatedly and strongly advised that the only trustworthy numbers are the ones reported by the company in their quarterly reports. He has also suggested that this is not labor intensive and only takes 5 minutes or so. This is true, I’m sure, if you have been doing this all along and only have the latest quarter to add. But if you have not made this a regular practice and have 3 years (12 quarters) of information to gather, it takes considerably longer than 5 minutes. And if you multiply that by 20 or more companies, it’s a rather time consuming effort. So the numbers I have come from Fidelity’s earnings page. I fully intend to validate them from the company’s reports, but I’ve not done so yet. My rational is that some numbers, even if somewhat suspect, are better than none.
EPS: (Q1 is reported in April/May. The number in paren in YoY change)
Q1 Q2 Q3 Q4 Year
2015: 1.08 (40.3%) - - - incomplete
2014: 0.77 (14.9%) 0.92 (15.0%) 1.05 (29.6%) 1.07 (52.9%) 3.81 (27.8%)
2013: 0.67 (9.8%) 0.80 (11.1%) 0.81 (0%) 0.70 (4.5%) 2.98 (6.0%)
2012: 0.61 (29.8%) 0.72 (14.3%) 0.81 (22.7%) 0.67 (9.8%) 2.81
The following are the numbers generated from Steve’s (SageWren’s) PE Chart application. Recent price: $95.85, PE: 23.3, YoY(ttm): 33.8%, 1YPEG: .69. For the last two years the stock has pretty consistently traded in a PE band of 20 - 25.
Replying to my own note . . .
So, it turns out if you reply to a note with table formatting, your reply
is also formatted that way, even if your didn’t check the little box.
In order to read my previous post, click the “format for printing” button.
So, it turns out if you reply to a note with table formatting, your reply is also formatted that way
Hey brittlerock, your post looks fine to me, but I also read post-by-post rather than as threads, and that might explain the difference.
Hi Brittlerock, I too had been in IPGP a couple of times but sold out when their growth seemed to stagnate in 2013. (You are looking at GAAP by the way. They do give a very clear accounting of their stock based comp on each quarterly report though, which makes for an easy calculation. My figures are adjusted.)
Earnings per quarter:
2012: 63 76 84 70 = 293
2013: 73 83 85 74 = 315
As you can see, earnings grew by only 7.5% year over year, which really isn’t much. Somewhere in there is where I sold out.
The first two quarters of 2014 weren’t that much different, but at least grew at 14%:
2013: 73 83
2014: 81 97
But then apparently something happened and the last three quarters earnings are up by an average of 40%:
2013: 73 83 85 74 = 315
2014: 81 97 110 112 = 400
They had dropped off my radar, but I’ll take another look at them. Thanks for bringing them to my attention. I’d be interested in finding out what happened to turn them from a stagnant company to one growing again, and whether it is sustainable.
In general they have two main problems.
1 - They make great lasers which don’t wear out, and don’t have consumable parts, so there is little if any renewable income.
2 - A considerable part of their company is in Russia (or was when I was in it at least), which gives political risk, considering how bad our relations with Russia are getting.
These are the notes I wrote to myself in July 2013:
Conclusion: They have no elements of a razor razorblade model. Their lasers last a long time and require little servicing and have no materials that get used up. They are dominant but already control most of the market. It will take them a long time to double. I’ve been trimming down to a small position. I may hold or get out totally.
I got out. Best
Hi again Brittlerock,
I’ve been reading the last conference call. It looks like they are coming up with more different kind of lasers for different applications, which is good.
I also discovered the following:
In the first quarter of 2015 a foreign exchange gain of $8.8 million was related to a position to build up dollar-based assets in Germany. The majority of that gain primarily came out of the depreciation of the euro. The FX gain had a bottom-line benefit of $0.11 per share…On a diluted per share basis, we reported $1.08 for the first quarter, compared with $0.77 a year ago. Excluding the benefit related to foreign exchange transaction gains during the quarter, EPS was $0.97.
That changes things a bit from what I wrote in the previous post:
But then apparently something happened and the last three quarters earnings are up by an average of 35% (but only 26% in the most recent quarter):
2013: 73 83 85 74 = 315
2014: 81 97 110 112 = 400
What still bothers me the most, is that when they sell a laser, that’s it. Then they have to go out and sell another laser. No repeat business, except selling old customers additional lasers, until they’re all lasered-up
Thanks for your input. I bought IPGP as a TMF recommendation on a paid service in 2012. In that I was fully committed to buy-hold MO I didn’t really pay a lot of attention to it. I figured, oh well, they will perform great someday and I’ll have a piece of the action when they do.
Then this year, I looked and thought, hm, this thing hasn’t done squat, I sold calls for $3.70 with a strike at $80, thinking I’d be happy if I could get that much. Anyway, the stock woke up. I bought the calls back (at a small loss - time value nearly consumed). Now the stock is over $96, so that way more than covers my loss on the options trade. Trying to figure out what to do next. Hang on to it or sell now and redeploy the investment. True, it’s taken a while to get there, but at present I’m up over 95% on my IPGP trades (not accounting for the option loss).
The business is reminiscent of Cognex. We’ve already had that discussion. As cool as the technology is, there’s few, if any, consumables, maybe some special welding rod or something. But there’s nothing to bring those customers back to the trough on an on-going basis.
IPGP seems to have bit more growth potential than CGNX in that they can penetrate more markets (material processing, communications, medical, others?) and they are developing new product lines in order to address a broader spectrum of applications. But how many super villains really need a laser in order to cut a British 00 agent in half, starting at the crotch of course (is that too obscure a reference? I think the James Bond movie was Goldfinger. As an aside, I think no film character has a more endangered scrotum than James Bond. I wonder, is that just another material processing application, or would it be a medical application?). In any case, you can only cut a double O agent in half one time, then you have to move on to the next agent. And no need at all to buy a new laser.
I think I’ll hang in there and see what the next quarterly report in August brings.
I’m not sure what happened to my post and it took me a while to write up so I’m not sure I’ll post again. You and Saul must have been reading my mind because it was along the lines of whether or not I should continue to hold. I’ve held since 2008 when the stock was trading around 10. Since starting to read this board (about watching YOY earning growth per quarter) I came to the conclusion that maybe it was time to sell and put the money to use in something like INBK or SWKS. I was just trying to reach out and see if anyone else held IPGP and what they planned to do.