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Why DHB Stock Looks Impenetrable

A leading maker of body armor and projectile-resistant vests, DHB Industries (DHB) seems to be, well, bullet-proof. The company sells its gear to the U.S. military and other NATO forces--as well as to agencies such as the FBI, New York Police Dept., Drug Enforcement Agency, and Bureau of Alcohol, Tobacco & Firearms.

The shares have been on a tear, rising from 2.20 on Sept. 10, to 8.10 on Feb. 7--before easing to 6.70 on Feb. 27. "When we decided late last year to buy into companies in the security business, DHB was one undiscovered stock we found that dominated its sector," says Annette Geddes, managing director of M.D. Sass Investors. Sass has accumulated about 5% of DHB. She notes that its sales and earnings are accelerating. Geddes figures DHB earned 37 cents a share in 2001 and expects 52 cents in 2002. Some 90% of DHB's sales are generated by the protective body garments, and 10% by its sports equipment, such as knee braces and protective gear for snowboarders.

Dennis Nielsen, an analyst at Miller Johnson Steichen Kinnard in Minneapolis has a 12-month price target of 10. He projects revenues of $130 million this year, up from an estimated $97.7 million in 2001. He thinks DHB will grow at 25% annually for the next few years. Demand for body armor is growing, he says, because of the increased ranks of security personnel. By Gene G. Marcial

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