We have noted before that a company does not have to hail from Silicon Valley in order to fit the description of a classic Taylor Frigon growth company (although some Silicon Valley companies do fit that description).
Today, we highlight a long-time portfolio holding based in Saxonburg, Pennsylvania -- advanced materials and laser component manufacturer II-VI, Inc.*
The company takes its name from the Periodic Table of the Elements, specifically in reference to elements found in columns II and VI (see diagram above), a name which stretches back to 1971, when the founders saw an opportunity to build a business around providing the highest-quality cadmium-tellurium material available, a material needed for the optics used to produce high-powered industrial CO2 lasers.
Cadmium (Cd) is found in the II group (atomic number 48) and tellurium (Te) is found in the VI group (atomic number 52).
Today, the company announced earnings of $0.51 per share, versus the consensus Wall Street expectation of $0.38 per share, on year-over-year revenue growth of 71% (also beating expectations on revenues) and earnings growth of 162%.
In his prepared remarks this morning, CEO Francis J. Kramer touched on some of the growth fields in which products manufactured by II-VI are participating.
He stated that "increased demand in the telecom segment is mainly driven by increased bandwidth demands that are resulting from increased Internet traffic worldwide, along with the worldwide deployment of 40G optical networks, and major infrastructure investments in Asia that are scaling in order to support mobile communications and computing applications."
We would note that the demand he is describing matches some of the trends we have tried to explain in numerous previous posts such as this one from February 2008, this one from June 2009, and this one from June 2010. The discussion of infrastructure for mobile communications was also highlighted in conjunction with another Taylor Frigon growth company in this recent post.
The laser components and other advanced materials produced by II-VI are used in many other industries besides networking and telecommunications. In another part of his call, the II-VI CEO described business activity from the most-recent quarter in many other potential fields of growth, including "a large order for UV filter assemblies which go into systems used for missile threat detection on airborne platforms. [. . .] On the commercial market front, VLOC [a II-VI business segment producing components for near-infrared optics, named for a company acquired by II-VI in 1996 that itself was a combination of two companies called Virgo Optics and Lightning Optics, hence the acronym] experienced growth with bookings increasing 20% versus last year. In the U.S. market, the growth is driven by an increase in demand for aesthetic medical application products. In international markets, demand for low-, mid-, and high-power industrial products supporting laser-based marking, welding and cutting applications is growing. [. . .] In China, VLOC is experiencing growth related to laser welding and marking systems being utilized in the industrial arena, as well as for the lasers being used in the manufacture of consumer products such as MP3 devices, iPhones, and batteries."
Did he just say iPhones?
II-VI is another excellent example of the focus that we recommend for investors. While there are aspects of government activity which will restrict the economy from growing as strongly as it could grow (and there always are, to greater or lesser degrees), investors should focus on finding innovative, well-run companies positioned in front of fertile fields for future growth. Doing so is always important, but doing so during more "unfriendly" business climates is even more critical.
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* The principals of Taylor Frigon Capital Management own securities issued by II-VI, Inc. (IIVI).
For later posts on this same subject, see also:
Today, we highlight a long-time portfolio holding based in Saxonburg, Pennsylvania -- advanced materials and laser component manufacturer II-VI, Inc.*
The company takes its name from the Periodic Table of the Elements, specifically in reference to elements found in columns II and VI (see diagram above), a name which stretches back to 1971, when the founders saw an opportunity to build a business around providing the highest-quality cadmium-tellurium material available, a material needed for the optics used to produce high-powered industrial CO2 lasers.
Cadmium (Cd) is found in the II group (atomic number 48) and tellurium (Te) is found in the VI group (atomic number 52).
Today, the company announced earnings of $0.51 per share, versus the consensus Wall Street expectation of $0.38 per share, on year-over-year revenue growth of 71% (also beating expectations on revenues) and earnings growth of 162%.
In his prepared remarks this morning, CEO Francis J. Kramer touched on some of the growth fields in which products manufactured by II-VI are participating.
He stated that "increased demand in the telecom segment is mainly driven by increased bandwidth demands that are resulting from increased Internet traffic worldwide, along with the worldwide deployment of 40G optical networks, and major infrastructure investments in Asia that are scaling in order to support mobile communications and computing applications."
We would note that the demand he is describing matches some of the trends we have tried to explain in numerous previous posts such as this one from February 2008, this one from June 2009, and this one from June 2010. The discussion of infrastructure for mobile communications was also highlighted in conjunction with another Taylor Frigon growth company in this recent post.
The laser components and other advanced materials produced by II-VI are used in many other industries besides networking and telecommunications. In another part of his call, the II-VI CEO described business activity from the most-recent quarter in many other potential fields of growth, including "a large order for UV filter assemblies which go into systems used for missile threat detection on airborne platforms. [. . .] On the commercial market front, VLOC [a II-VI business segment producing components for near-infrared optics, named for a company acquired by II-VI in 1996 that itself was a combination of two companies called Virgo Optics and Lightning Optics, hence the acronym] experienced growth with bookings increasing 20% versus last year. In the U.S. market, the growth is driven by an increase in demand for aesthetic medical application products. In international markets, demand for low-, mid-, and high-power industrial products supporting laser-based marking, welding and cutting applications is growing. [. . .] In China, VLOC is experiencing growth related to laser welding and marking systems being utilized in the industrial arena, as well as for the lasers being used in the manufacture of consumer products such as MP3 devices, iPhones, and batteries."
Did he just say iPhones?
II-VI is another excellent example of the focus that we recommend for investors. While there are aspects of government activity which will restrict the economy from growing as strongly as it could grow (and there always are, to greater or lesser degrees), investors should focus on finding innovative, well-run companies positioned in front of fertile fields for future growth. Doing so is always important, but doing so during more "unfriendly" business climates is even more critical.
Subscribe (no cost) to receive new posts from the Taylor Frigon Advisor via email -- click here.
* The principals of Taylor Frigon Capital Management own securities issued by II-VI, Inc. (IIVI).
For later posts on this same subject, see also:
- "Have you heard of this company? CHRW" 09/20/2010.
- "Have you heard of this company? NAT" 11/22/2010.
- "Have you heard of this company? EZCH" 12/09/2010.