LMI Aerospace, Inc.
) may have a spotty earnings history, but estimates and guidance continue to improve.
This Zacks #1 Rank (Strong Buy) carries some risk, but it just might take off.
LMI Aerospace provides design engineering, structural assemblies, kits and components for the aerospace, defense and technology markets.
On Mar 11 LMI Aerospace reported fourth-quarter results that fell short of expectation, but they provided bullish guidance into 2011 and showed some solid year-over-year improvements.
While revenue decreased slightly, down 2% to $54.7 million, net income nearly quadrupled to $3.1 million. That works out to $0.26 per share, up from $0.07 a year ago. Unfortunately that was a penny under the Zacks Consensus Estimates.
More importantly though, LMI Aerospace said it expects its top line come in between $259 and $271 million for the year, up from $223 million in 2010. That range is up slightly from the company's original forecast.
Earnings Taking Off
After the earnings release the average estimate for 2011 rose 8 cents to $1.58. Next year's Zacks Consensus Estimates is also up 8 cents, to $1.85. Given the $1.11 earned last year, the projected growth rates are 43% and 17%, respectively.
Valuations Look Good
Even with those strong growth rates, shares are still trading at just 12 times the 2011 estimates. The PEG ratio is coming in at 1.2 times, meaning that the expected long-term growth is fairly priced. But of course those expectations can rise.
Additionally, since this company is a small cap, about $220 million, I like that the price-to-sales is at 1.0, better than its peer group average.
The company has fallen short of expectation in each of the past 3 quarters, but continues to make improvements and guide higher. Fortunately for share holders, that has been enough to keep the price rising. If you can stomach the ride, it could pay off if they start coming in ahead of expectations.
Earnings can be volatile, but LMI Aerospace has consistently improved its cash flows and that should continue as we see pent up demand hit the market.
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