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Bull Of The Day: Electro Scientific Industries (ESIO)

Brian Bolan

Electro Scientific Industries (ESIO) is a Zacks Rank #1 (Strong Buy) and recently guided higher. This caused the stock to rocket higher to the $27 range, but in recent trading the stock retraced back below $24.  The question is, should you be buying this stock?  Well, today, it is the Bull of the Day and this article might help you make that decision.

Description

Electro Scientific Industries supplies laser-based microfabrication solutions for the microtechnology industry worldwide. It provides printed circuit boards, including laser via drilling systems for electrical interconnect applications; micro via drilling technology that addresses the changing applications in integrated circuit packages, multichip modules, and high density interconnect circuit boards; and ultraviolet laser processing systems comprising single-beam and multi-beam systems. Electro Scientific Industries, Inc. was founded in 1944 and is headquartered in Portland, Oregon.

Guiding Higher

On January 17, the company raised guidance for the current quarter.  They now expect revenue to be $106M - $111M, up from $80M - $90M when the consensus was calling for $85M.  Management noted that EPS will come in above the previously guided to range ($0.48 - $0.60) when the consensus was $0.55.

This was a big guide higher, but it wasn't the first of its kind.

On November 1 the company set forth the original guidance during the previous earnings call.  At that time, the revenue estimate for the next quarter (the one that will be reported on 1/31) was $45M in revenue and $0.02 in EPS.

Earnings History

I see a very solid earnings history for ESIO, with four of the last four reports coming in ahead of the Zacks Consensus Estimate. In fact, the beats have not been small ones, they have been very large.  The average positive surprise is an impressive 110%.

Valuation

The multiples that I see on the Zacks Website make me scratch my head.  I see a 10x forward earnings multiple and a 40x trailing number.  That can happen when estimates skyrocket like they have for ESIO, so the real question is why investors haven't taken hold.  The price to book of 5x and price to sales of 3.3x are more or less in line with industry averages.

Analysts

Needham first moved their target to $27 following the November 1 earnings report.  Now they have moved their target to $35 and that is before the company is reporting earnings on 1/31.

It isn't a secret that I hold ESIO in Home Run Investor, a subscription service that send buy and sell alerts for small and mid cap stocks.  I tweeted some time back that Home Run added shares on October 25 at just under $17 a share.  Here is the tweet (https://twitter.com/bbolan1/status/925869286811488256) so think about this when ESIO reports again on January 31.

 

Electro Scientific Industries, Inc. Price and Consensus

Electro Scientific Industries, Inc. Price and Consensus | Electro Scientific Industries, Inc. Quote

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