Black Diamond, Inc.
) is fresh of an earnings surprise that gave investors plenty to smile about. Sales were up, earnings are trending higher, and the company's latest growth initiative has everyone optimistic about his Zacks #1 Rank (Strong Buy).
Black Diamond makes outdoor products for climbing, mountaineering, skiing and other year-round activities.
Sales Up 24%
On Oct 31 Black Diamond reported impressive third-quarter results. The top line grew 24%, to $42 million thanks to several new products hitting the market.
The company also improved efficiency, which led to net income of $1.0 million, up from a $3.3-million loss a year ago. Earnings per share came in at $0.06, 3 cents higher than the Zacks Consensus Estimate.
While the margin improvement was there, it is kept in check. Fortunately that is due to continued investments that should lead to sustainably growth in the future. Right now the main focus seems to be expanding into apparel that should be coming out in 2013.
Into the Black
Analysts polled by Zacks are expecting EPS for the year to be $0.05, up from a $0.49 loss in 2010. Next year's forecasts are averaging $0.19. At these levels the earnings growth rates are pretty extreme, but the sales expectations are showing signs of solid growth.
Revenue is expected to come in at $145 million this year, which is a 91% increase. Next year analysts are looking from $164 million, a 13% growth rate.
With the lower earnings figures the valuations can look quite high. But if you look to the price-to-sale at 1.3 it is more reasonable. Also stock is trading at just 1.1 times book value.
BDE is definitely not for the bottom fishers out there. Shares have been up sharply the past few weeks. They also spiked on the earnings news, but retraced quickly.
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