Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
(ZOLT:Nasdaq) is in the business
of fibers, mostly carbon fibers.Plain,
simple fibers may not seem very impressive.However, Zoltek’s carbon fibers are in wide demand for renewable energy
applications such as wind turbines blades and deep sea oil and gas wells.After two years swimming in red ink, Zoltek has
managed to bring sales back up to 2008 levels.The company earned $22.9 million in net income on $186.3 million in
total sales in the fiscal year ending September 2012.During the same period Zoltek cleared 9.3% of
total sales as operating cash flow.
are expecting modest growth in the next fiscal year.The consensus estimate is $0.69 on $189
million in total sales in fiscal year 2013.The estimate has remained unchanged in the most recent weeks, even
though Graftek failed to meet earnings expectations for the September 2012
management is a bit more enthusiastic about its future.That is because the carbon content of durable
goods is rising at a fast pace-so fast some manufacturers are concerned
about a shortage of carbon fibers in the future.For example, aircraft are adopting carbon
composites for floors, luggage bins and even seats as a means to reduce overall
aircraft weight.Boeing’s Dreamliner 787
is the first large-scale commercial aircraft made using 50%
composite materials including plastics and carbon fiber.
The company has been working on new technologies for
cutting and milling carbon fibers to facilitate mixing carbon fibers with
thermoplastics.Such plastics are now
used in electronics such as computer hard drives and printers.Lacing the thermoplastic with carbon would
add durability and extend the range of potential applications. Most likely new
markets would be automotive and aerospace.
Zoltek has spent $23.8 million or 5% of sales on research
and development efforts over the past three years.Indeed, R&D has taken on added visibility
over the past couple of years with the central effort carried out at the
company’s plant in St. Peters, Missouri.Much of the effort is aimed at improving production processes, but
management is also keen on finding new ways to use carbon.
automotive industry figures prominently in Zoltek’s growth plans.In 2010, the company formed a new subsidiary,
Zoltek Automotive, to help facilitate the adoption of carbon materials in cars
and trucks.Tesla Motors (TSLA:Nasdaq) already uses Zoltek fibers for its
electric sports cars.
can afford to move aggressively on market opportunities.At the end of September 2012, there was $29.9
million in cash on its balance sheet.Debt totaled $27.1 million, but the debt to equity ratio is a modest 0.09.
We have added Zoltek to the Materials Group
in our Mothers of Invention Index for innovators in
energy, efficiency and conservation.The
stock trades at 11.1 times forward earnings, which looks like a bargain for a
well-capitalized company that appears poised to offering significantly higher
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies