Unlike most other computer component makers, Park Electrochemical (PKE) is more swim than sink. Last year, the Lake Success (N.Y.) company, which makes resin and laminants for printed circuit boards, was turning away customers. Why? Lack of capacity. Its plants couldn't meet demand, so Park beefed up capacity in California and expanded factories in Singapore and France.
Now that Park's plants are up to speed, however, demand has skidded. An industry inventory buildup prompted Edward White of Lehman Brothers to tone down his estimates: He trimmed revenue forecasts for fiscal year 2002 and cut earnings estimates by 10 cents, to $2.85 a share. The stock has fallen, too, from a 52-week high of 50 in November to 29.50 on Feb 28.
Nevertheless, White is high on the stock and blames the price drop on an "unwarranted" sell-off. Park's plants are now set to produce higher-end products for wireless base stations and routers, instead of just laptops and cell phones, he notes. So far, results have exceeded Wall Street's forecasts: On Feb. 15, Park announced that earnings for the fourth quarter ended Feb. 27 would beat consensus estimates of 64 cents. This follows three quarters of exceeding its forecasts for earnings and operating margins.
A stock with a price-earnings ratio of 10, with cash earnings growing at 20%, fits the bill for Needham fund manager Peter Trapp. "This is good quality for a consistent earnings streak," says Trapp, who sees Park hitting 100 in two years. He bought Park a year ago at 14 1/2, and it's now a top-10 stock in Needham's $133 million Growth Fund. The fund is up 13% this year, after a 7.4% gain in 2000's erratic market. The fund's annualized five-year return is 35%-plus.
Gene Marcial is on vacation. By Mara Der Hovanesian