Researcher, re: OUTL. Did you have a chance to read through the management discussion of results in the Q1 10Q? Looks like the company will be hitting some difficult comps coming up......not sure that the Q1 results (esp earnings) are repeatable in Q2 and Q3:
"Based upon current production orders, the Company currently believes that its
sales levels for the second quarter of fiscal 2006 are likely to be slightly
lower than in the first quarter of fiscal 2005, but ahead of the prior years'
levels. The net results for the second quarter will be affected by the level of
sales, product mix, and could also be affected by increases in energy and other
costs. In addition, the second quarter of fiscal 2005 experienced the benefit of
a significant recovery of bad debt that arose prior to fiscal 2005; the Company
does not expect to benefit from such an unusual event in the second quarter of
fiscal 2006. The bad debt recovery increased the Company's second quarter fiscal
2005 earnings by approximately $1.2 million pre-tax ($0.7 million after-tax),
and fully diluted per share net income by $0.22. Due to the fact than many
clients purchase the Company's services under cancelable purchase orders rather
than long-term supply agreements, and the sales volumes of the Company's longer
term agreements are not guaranteed, predictions of the Company's net sales and
future results of operations have been difficult. Based on the project-oriented
nature of the Company's business, the Company remains vulnerable to
significant period-to-period fluctuations and the Company's largest clients have
historically tended to vary from year to year depending on the nature of the
number and size of the projects completed for these clients. The loss of IMP,
P&G, or one or more other principal clients or a change in the number or
character of projects for particular clients could have a material adverse
effect on the Company's sales volume and profitability.
Based on historical activity, the Company has often experienced weaker sales
volume and profitability surrounding the third quarter. In fiscal 2005, in
addition to the third quarter being particularly strong, those historical
effects were also offset to a significant degree by an insurance recovery and
the profits from the sale of unused equipment, neither of which is expected
during fiscal 2006. In the third quarter of fiscal 2005, these items, on a
combined basis, increased the Company's earnings by approximately $0.3 million
pre-tax ($0.2 million after-tax), and fully diluted per share net income by
$.05. Since these unusual factors in fiscal 2005 are not likely to reoccur, the
Company has no reason to expect that fiscal 2006, will see trends substantially
different than those in years prior to 2005. Actual future results could vary
significantly and are highly dependent upon the amount and timing of orders
received from customers, and other factors mentioned in prior periods."
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FWIW, I found the candor expressed in the 10Q to be refreshing. But I don't think I'd be buying here until the stock absorbs the next two quarters.
Here's my quick take: at an adjusted TTM pe of 16.5x, I think the stock looks reasonably valued, with a lack of immediate buying catalysts in front of it. Its not expensive by any means, and the dividend provides some small return while you're waiting......
AI
