Through The Fly's Eyes: GSI Group
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
GSI Group: Industrial Laser Maker
Manufacturing processes that were unimaginable a generation ago are now commonplace, thanks to the development of laser technology. A leader in the art of fabricating lasers for the broad spectrum of current industrial applications is headquartered in Billerica, Massachusetts.
GSI Group (GSIG) supplies precision technology components, lasers, and laser-based manufacturing systems to the electronics, semiconductor, medical, aerospace and industrial markets. Its Precision Technology segment offers air bearing spindles; encoders; optical scanners; thermal printers; general optics; and lasers that are used for welding, cutting, drilling, surface marking and engraving of metal and plastic parts. The company's Semiconductor Systems segment designs, develops and supplies production systems that enable the manufacturing of semiconductor chips. Hitachi (HIT) is a competitor.
The company pleased investors last week, when it guided Q3 EPS to 16-18 cents and Q3 revenues to $82-84 million. Its previous predictions had been for 9-13 cents and $77-82 million. Analysts were expecting 11 cents and $80.6 million. Management cited follow-on orders from an existing customer and final acceptance of a multi-system order from a new customer for the improved view.
The stock popped on the news and has since moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with one "buy" and one "hold". Analysts see a 15% average annual growth rate, through the next five years. The GSIG Price to Sales ratio (1.58), Price to Book ratio (1.35), Price to Cash Flow ratio (14.62) and Price to Free Cash Flow ratio (17.77) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 62% of the outstanding shares. Over the past 52 weeks, the stock has traded between $8.21 and $11.55. A stop-loss of $9.75 looks good here. Note that the firm is expected to announce Q3 results on October 23rd, after the close.