Graphene Machine Earnings

Quick note about last month's "Idea of the Month" and their earnings report

Just a quick note on two stocks I follow and own: our last idea of the month, CVD Equipment (CVV) just released earnings and disappointed the market a bit — I think it’s likely to be a buying opportunity, but the opportunity may persist for another quarter until they get their short-term order book built back up and their manufacturing capacity increased with the move to their larger facility over the Summer. Moves always take more time and effort than expected, so they say “mid-year” but I would be surprised if they were completely up and running in the new facility before the end of the third quarter.

CVV has essentially, according to them, sacrificed short-term order growth because they can’t fulfill a lot of extra orders in the next few months while they’re moving — they’ve repurposed their sales force to pushing their longer-term goals of building up advanced material sales and equipment, the nanomaterial/graphene stuff that got Louis Navellier so hot and bothered when he was teasing this stock. By the end of the year they will have roughly twice the manufacturing capacity as they had over the Winter, and they should be able to build their backlog back up. Investors were concerned because their share issuance a few months ago meant the EPS number was down year over year (12 cents versus 14 cents), and because the backlog dropped as they ate into it without booking new orders. I’m giving management some leeway on this because they’re in a growth-focused transition to new facilities and new business lines, and I’m taking some confidence from the fact that they also just booked a big order (after the close of the quarter), so demand from existing customers is apparently still there.

With a stock this small it could easily drop further over what will probably be a weak Summer for CVV, absent any big long-term orders or other deals, but I think buying in the $11-12 range (or lower, if we get a dip on the next quarter but otherwise seem to be on track with the move and future order flow expectations) will work out very well for investors over the next several years. I still own the stock and, as suggested in the Idea of the Month article, still wouldn’t suggest buying it over $13.

The earnings press release is here.

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