Ceradyne Follow-up

Faisal Laljee notes what we observed yesterday on Ceradyne (CRDN): little movement on very positive news. He believes that product diversification or an analyst upgrade will get the stock moving. We disagree, as a look at the comparables still suggests CRDN is trading at an appropriate level. In fact, yesterday’s multiple looked to have more room for downside than upside.

Speaking of its comparables, the McGill Investment Club talks in detail about Armor Holdings (AH).

In fact AH P/E is around 16 whereas the industry average is approximately 23. AH
is has been considerably growing in the past years, having a average 5
year growth in sale of 63%. Yes, 16 P/E and 63% average growth rate.

Well, that was then. What investors see now is a company producing as much vehicle armor as the military wants to order right now, and although the demand should stay strong we said before that strength and growth are two separate monsters.

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One Comment on “Ceradyne Follow-up”

  1. [...] Although the stock rallied sharply to close above $47, that still is a multiple barely above 9x next year’s earnings. Although investors are clearly skeptical that the company can generate much more growth (as we have written previously) it is also hard to imagine the shares declining much farther until earnings actually do level out or decline. The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA - Annual Report; Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options; [...]

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