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Shares are a Zacks #1 Rank (Strong Buy) with great growth rates, but also trade with attractive valuations.
Kadant is a supplier to the pulp and paper industry. The company's products are also used in the steel, rubber, food and other industries.
Getting Better and Better
Since being featured on Mar 1, Kadant has reported another earnings surprise. On Apr 27 the company said its quarterly revenue was up 17%, to $72 million. That led to net income of $5.8 million, a 61% jump.
Earnings per share came in at $0.47, up sharply from a year ago and 11 cents higher than the Zacks Consensus Estimate. Earnings surprises have become the norm for Kadant, which has topped forecast in every quarter for the past 5 years.
There are only 2 analysts polled for KAI's expected earnings and they both supplied dramatic upward revisions after the company raised its guidance in the quarterly update.
Forecasts for this year jumped 49 cents, to $2.19. Next year those analysts are looking for $2.33, a 33-cent improvement. Given the $1.41 Kadant earned in 2010, the projected growth rates are 55% and 7%, respectively.
And a Value?
Thanks to those estimate revisions, shares of KAI are trading with great valuations too. The forward P/E is about 14 times and given a 21% long-term growth rate the PEG ratio is just 0.7. Both metrics showing a solid value.
Yes, shares of KAI also jumped on the earnings news. But take a look at the long-term earnings trend. Year-over-year growth has been there for a while, but we are also getting big upward moves throughout the year that should drive KAI even higher.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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