IPG Phototonics: Homing in on a growing company

Alex Alexandrov | Feb 14, 2008 5:05pm EST | Comment

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IPG Photonics Corp. (Nasdaq: IPGP)
Oxford, Mass.
http://www.ipgphotonics.com/

52-week low / high: $15.48 / $25.85
Shares Outstanding: 43.78 million
Market Capitalization: $795.87 million

IPG Photonics Corp. (Nasdaq: IPGP) is a manufacturer of fiber lasers and amplifiers that is well-positioned to take advantage of a rapidly growing market. Fiber lasers, which easily deliver light to a moving mechanism, can cut with great precision and are thus used widely in material processing, telecommunications and medicine.

Oxford, Mass.-based IPG Photonics made 71.4% of its 2006 sales to customers engaged in materials processing, which includes applications such as marking, engraving, printing, welding, cutting and drilling. Sales to customers using the lasers for medical purposes, such as skin resurfacing and other surgical procedures, constituted 7.8% of the total, while customers buying lasers for telecommunications purposes accounted for 10.6%.

Results for the full year 2007 have not yet been announced, but the company got off to a good start. Revenues for the first nine months of 2007 increased 32.1% to $133.6 million, from $101.1 million during the same period in 2006.

Revenues for the third quarter ended Sept. 30, 2007, the most recent quarter for which data is available, were $47.9 million, a rise of 32.3% from the same three months in 2006. Revenues from sales of fiber lasers used for materials procession applications, which grew 36.7% year-over-year, were 72% of total revenues.

Analysts expect IPG Photonics to report fourth-quarter earnings of $0.19 per share on revenues of $53.2 million. Earnings for the entire 2007 are forecasted at $0.66 per share on $186.6 million in revenue.

Looking ahead to 2008, Wall Street projects that profit will increase 36% to $0.90 per share, while revenue is expected to rise 26% to $235.1 million.

On its website, IPG Photonics cites a survey according to which the market for fiber lasers will grow from $131 million in 2005 to $674 million in 2010, a 39% compound annual growth rate. Fiber lasers are replacing traditional lasers in some markets and non-laser technologies in others.

With its global manufacturing base and geographically diverse customer profile, the company, which was founded in 1990 and went public on Dec. 13, 2006, is in a good position to take advantage of the trend.

IPG Photonics has manufacturing facilities in the United States, Germany, Russia and Italy. Its sales offices are located in those four countries and in Japan, South Korea, India and the United Kingdom.

The company markets its products primarily through its direct sales force and also through agreements with independent sales representatives and distributors. In 2006, sales to Europe, North America, and Asia and Australia each accounted for about one third of total sales.

On Dec. 14, 2007, IPG Photonics announced that its Russian subsidiary is supplying equipment to Svyazinvest, one of the leading telecom companies in the country.

With a track record of profitability and operations spanning the globe, it looks like this laser maker has positioned itself for consistent growth.

Note: IPG Photonics Corp. (Nasdaq: IPGP) is on the “Watch List” of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, IPG Phototonics displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.