Flir Systems (FLIR)
By
Paul Goodwin
, Analyst and Editor of
Cabot China & Emerging Markets Report
From Cabot Wealth Advisory, 6/2/08
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My stock idea for today is a pretty big company (market cap $5.3 billion) that specializes in infrared imaging. The company is
Flir Systems (FLIR), an industry leader in military and commercial infrared sensing.
(I've written about Flir before, in the September 17, 2007 Cabot Wealth Advisory. At the time, the stock was trading at 25. Today, after a correction, it's trading above 38.)
The company made its name (literally: Flir comes from the acronym for its first headline-making product, the Forward-Looking Infrared Radar sensing system) in the military equipment business, and this remains the most important segment of its business.
But it's not the only market for Flir's instruments and systems. The company also has a Commercial Vision Systems division that sells to law enforcement and aviation entities and a Thermography division that addresses the needs of industrial and scientific organizations.
Flir's systems have been instrumental in allowing soldiers to see through the darkness and the smoke of battle. They have also been used in pilotless drones, on ships and in factories where they can detect hot spots in equipment.
All in all, it's a very useful technology, and Flir has been making good money at it. The latest quarterly report showed earnings up 33% on a 47% increase in revenues, resulting in a 15.8% after-tax profit margin. Support from institutional investors just reached a new all-time high, reflecting confidence in the company's long-term profitability.
FLIR had a nice run in 2006-07, rising from 11 to 36. The winter bear dragged the stock back to 24, which is where the markets recovery and an excellent earnings report got it moving again. Just last week, the stock pushed over 40 for the first time, and it has now corrected back toward 38. With its 25-day moving average between 35 and 36, this correction has made the stock a better buy.
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