From the Wall Street Journal....
Unheard-of Stocks
By JACK HOUGH
July 10, 2008; Page D3
A portable laser scanner is handy for recording crime scenes. It can capture three-dimensional images quickly and accurately while noticing details that measure just a few thousandths of an inch.
Those same attributes make portable laser scanners a natural choice for heaps of business applications. They can draw up plans for existing buildings, recreate real-world buildings in video games or make sure manufactured airplane parts match computer-drawn designs.
One thing portable scanners can't measure is their own market potential. Nonportable measuring machines, generally built for a single task, bring in sales of about $1 billion a year. Portables, which can switch jobs with a software change, create new uses for themselves and so might be good for $2 billion to $3 billion in yearly sales, say Wall Street analysts.
Faro Technologies Inc. specializes in 3-D laser scanners. Its sales are seen rising 19% to $228 million this year. It has spent dearly in recent years to make and market its products more quickly than competitors, which has crimped profitability. Each dollar in sales over the past year became a dime in operating profit, barely better than the broad market's average. Management hopes it will eventually expand that dime to 18 to 25 cents on the dollar.
That won't happen this year. Orders in Europe and Asia have been strong, but customers in North America have proved cautious on the economy. Faro barely grew profits in its first quarter and missed Wall Street estimates by a wide margin. Full-year growth is seen at 6%, suggesting a second-half recovery. Next year's outlook is more optimistic, calling for 33% profit growth. Its stock is at 17 times forecast 2008 earnings, near the low end of its historic range.
Faro turned up recently on a search for companies that are covered by few analysts despite strong growth prospects, modestly priced shares and profits that, on average, have come in better than expected over the past four quarters.
