FLIR Systems – Thermal Imaging that can heat up your portfolio
9th September 2009
FLIR Systems, Inc. is the global leader in Infrared cameras, night vision and thermal imaging systems. Our products play pivotal roles in a wide range of industrial, commercial and government activities in more than 60 countries. Pioneers in the commercial infrared camera industry, the Company has been supplying thermography and night vision equipment to science, industry, law enforcement and the military for over 30 years. From predictive maintenance, condition monitoring, non-destructive testing, R&D, medical science, temperature measurement and thermal testing to law enforcement, surveillance, security and manufacturing process control, FLIR offers the widest selection of infrared cameras for beginners to pros.
FLIR has been a steady performer in a niche business. 2009 will be the ninth straight year of increased sales and earnings. Government related sales were about 53% of 2008 revenues. Home Inspectors use FLIR products to check for mold behind walls and to pinpoint heat leakages. BMW automobiles use FLIR technology in their night-vision option package on their high-end cars. Electricians use FLIR’s handheld viewers to locate energy leaks within walls. The company continues to do R&D on new uses for its products and to lower the manufacturing costs enough to make them cost effective for more end users.
First half 2009 EPS came in at $0.70 versus $0.53 (+ 32%) and Zacks sees full year earnings at $1.43 v. $1.28 despite the recession. They presently estimate $1.52/share in 2010. That makes FLIR’s multiple about 16.6x this year’s and 15.6x next year’s expectations. That’s their lowest levels since 2001.
Buyers of FLIR shares in 2001 saw their shares surge from a split-adjusted $0.50 to $18.20 over the next 3.5 years. The shares bottomed briefly again at $10.60 in mid-2006 at a 16.2 multiple that is similar to today’s level. Buyers at that time saw their shares rise to a peak of $45.50 by June of 2008.
FLIR’s balance sheet looks beautiful. As of their end of June report they held $346 million in cash against total debt of just $89 million. No debt comes due in the next five years. Current assets of $863 million dwarf current liabilities of $157 million. Debt is just 8% of capital and interest coverage was 33.8x last year.
Value Line rates their ‘price growth persistence’ and ‘earnings predictability’ as being in the 85th and 95th percentiles respectively (with 100th being tops). Standard and Poors assigns them 4-stars (out of 5) and sees a 12-month target of $28 /share.
A reversion to even 17.5 times this year’s estimate leads me to a > $25 goal price by the time year-end numbers are released. Is that a crazy expectation? If anything, it’s probably too conservative. FLIR actually traded as high as $36.40, $45.50 and $32.30 in calendar 2007-2008 and YTD in 2009.