Update on CFK, GLBL, STKL

Three stocks that I have previously talked about had earnings reports in the past couple weeks and all three had very positive news to report. Sending their shares up the next day at least 5%.

CFK(CE Franklin Ltd.) came in with a 50% increase in income to 21 cents/share. Along with a sales increase of 25% over the same quarter a year ago. While their revenue was not as high as I was expecting, as I stated in my previous post this past quarter is their hardest to do business and should not be used a barometer of their stock. Look for their next quarter to post a sales increase in the 30-60% range again, hopefully taking advantage of the warm weather this summer. On a side note their CEO has to be one the most least excitable people in the business, here is his quote from their PR:
"A benchmark of success for oilfield service companies is to be profitable during spring breakup when activity levels drop of significantly," said Michael West, Chairman, President and CEO. This is the third year in a row we have been profitable during breakup."
I don't think I will be asking him for any motivational speeches but I still love this growth story and their fundamentals. With this low P/E I still think this is a screaming buy.

GLBL(Global Industries, Ltd.) reported one of the best quarters I have ever seen. Their net income came in with over a 400% increase over a year ago blowing away the analysts estimates. They also reported a revenue improvement of 76%. One key stat that I am continuing to follow with this company is their order backlog, the amount of work they have signed up for the future. One concern I had with this company was their ability to bring in more work after hurricane repairs were finishing up. Their backlog continued to increase this quarter to $693 million. Meaning they are bringing in more work then they can currently. I would say that is a good problem to have. With a forward P/E of 11, Price/Sales of 2, incredible growth a future prospects I still like this stock a lot.

STKL(Sunopta) continues to be a high growth machine. They matched analyst estimates for earnings at 8 cents/share showing a 30% increase along with a 50% increase in revenue bringing in a record quarter for the company. They continue to show great improvement in their food division, while this division is carrying the company currently their Bioprocess division has been signing up new relationships and shows great potential. This division is still a hidden gem as it is not bringing in much money but is positioning for great numbers in the future. Their CEO states that $1 billion in sales is their goal for next year Bioprocessing could be a big surpise part of that equation. I still like this stock but with a higher P/E then the other two I do not like it as much in this uncertain economic environment.

Back from my World Cup Hiatus with CE Franklin (CFK - $13.50)

Now that the World Cup is winding down, watching games at night will no longer get in my way of researching stock picks. Since the US team poorly represented our country over in Germany, I am going to head to our friendly neighbors in the North to nab my next stock pick. CE Franklin has a very compelling growth story behind it and consequently has been on my radar for a couple months.

CE Franklin is a distributor of oilfield supplies (pipes, valves, equipment) to companies in Canada that produce oil and gas. It has 41 branches and stocking points positioned around Canada to meet the needs of their customers. This is a great growth story because not only is Canada already a huge oil producing nation but it is only going to grow in the future with the development of the Oil Sands region. CFK should be well positioned to take advantage of this growth trend as they are already located in and servicing the product needs of the Companies producing the oil.

CFK is not a complete hidden gem as it got a fair amount of attention from its exposure to the Canadian Oil Sands. It along with many other stocks had an incredible run in the past year, more then tripling from May of 2005 to May of 2006 before pulling back 25% to these current levels. Anytime a stock has had this much of a rise in price I am always weary of what may come next as people will be looking to cash in on their profits. I am hoping, however, that this recent drop has flushed out the profit takers and this $13 level will be seen as a great entry point to others.

Beneath the growth story are some astronomical financial results. In the previous four quarters their sales growth over the same quarter the year before grew at 37%, 56%, 35% and 38% respectively. That is some great consistent growth while their income growth has even been larger then that. With that kind of growth and the fact that CFK is in a hot sector I was amazed to see that it only has a P/E of 13. Depending on how one calculates, that is much less then half the company’s growth rate. So even after having a dramatic price increase over the past year this stock is still incredibly undervalued.

As always with these small stocks there are several caveats. This stock has a small market cap of $240 million, only averages 120,000 shares in volume each day and according to their press release the summer months are their lowest in sales:

The Company's sales levels are affected by weather conditions. Many exploration and production areas in northern Canada are accessible only in the winter months when the ground is frozen. As warm weather returns in the spring each year the winter's frost comes out of the ground rendering many secondary roads incapable of supporting the weight of heavy equipment until they have dried out. As a result, the first and fourth quarters typically represent the busiest time and highest sales activity for the Company. Sales levels drop dramatically during the second quarter until such time as the roads have dried and road bans have been lifted.

While the company warns that sales will be lower then the first quarter of this year, the key point to look at will be the sales from the second quarter this year compared to the second quarter from last year. So far there are no indications or reasons to think that they can not continue this 30% - 60% sales growth rate. This should be seen in their next quarterly report and provide a nice bump in price.

A quick look at Yahoo! Finance shows no analysts currently covering the stock, so another potential catalyst is the opening of coverage by an analyst. Generating more attention and if given a good coverage rating a bump in price.

It is hard to say what price per share I am expecting for CFK in the future. Generally I would think at least a P/E equal to its growth rate if not double its growth rate. A P/E of 30 would put this stock at over $30. Do I think that is fair? Yes. Do I expect more than that? We shall see…

Global Industries (GLBL - $16.95) a Great Stock for the Summer

This stock is not exactly unkown, it has a little more then doubled in the past year. The stock also has 6 analysts covering it, so there is a fair amount of coverage on it as well. But the reason I think you should take interest in this stock is because what it did last summer. From June through September it went from $8 to $15. Global Industries provides marine services to the oil and gas industries. This includes platform installation and removal, diving services and pipeline construction. They have profited greatly over the past year not only from oil prices being higher but also from the hurricanes that hit the gulf coast last year. With hurricane season officially kicking off last week, the question is will hurricanes hit the gulf coast again this year?

Global industries operates in five geographic areas of the World with the Gulf Coast and Latin America areas making up over 60% of their revenues. In their most recent quarterly earnings release, revenue was up 80% from a year ago and income was up more then 100%. With that incredible growth, the stock is only trading at 14 times its expected 2007 earnings. There are some reason for concern, investors might have stayed away because they feel this type of growth can't be sustained without hurricanes hitting the area every year. Well, they stated in their earnings release that their orders backlog has doubled from a year ago to $660 million so there is no evidence of a slow down yet. As it stands now, they should have plenty of business to take them through a great year.

Now back to the question I posed at the beginning. Will a hurricane strike the gulf coast this year? Of course no one knows the answer to that question. And of course no one (At least I hope no one!) is wishing for a hurricane to come just to profit off of it. But if a hurricane does come this stock will benefit greatly from it just like it did last summer. If this stock traded at a very reasonable level of 25 times 2007 earnings it would be at $30. I would consider that a fair level for the stock by year end and if a hurricane comes this summer to the Gulf Coast, I expect a price over $30 by the end of the summer.

Go Digging North of the Border with Taseko Mines (TGB - $2.50)

In this crazy market all stocks should be looked at with a critical eye, especially any stock that is involved in commodities. Commodity prices and stocks had been on a tear up until a couple weeks ago when the rug was pulled out from underneath them. Certainly there was a lot of money put into these looking for a quick buck that all run for the exits at the same time. However, one thing has not changed and that is the global demand for a lot of these commodities and in this case copper. You can look at all the statistics that you want to but developing nations like China and India needs a lot of copper. I think the demand and thus the price of copper will be around these levels for a long time.

Taseko Mines owns three mining properties in Canada of which one is currently being mined and generating revenue. Their current mining project (called Gibraltar) is producing about 13 million pounds of copper per quarter and they are projecting for that number to increase in the next two quarters. But what is really being overlooked with this stock is their other mining properties. The second mining property that they own (called Prosperity) is actually a copper and gold deposit that is undeveloped and going through feasibility studies right now. The first study of this property showed measured and indicated resources of copper at 4.4 billion pounds of copper and 9.2 million ounces of gold. Quick math on those numbers would put the value of the copper at over 13 billion dollars and the value of the gold at over 5.5 billion dollars! I simply can’t believe this company has not gotten more attention from this.

The stock was hit badly after they released their last quarterly earnings report so this is not a completely rosy picture. Their copper production was down a little from last quarter and also below the same quarter a year ago. In their conference call they discussed that some freak things happened like birds causing power lines to go down and a shortage in tires for their trucks. So I don’t think it is a big deal that their production is down as it should be on its way back up. Last month they announced that they are upgrading their concentrator to expand production which also is a positive for this company going forward.

Even though production was down, earnings were up to 3.1 million as compared to .6 million in the same quarter a year ago. This is due in a large part to the price of copper which they sold at an average of $2.06 in this past quarter. With copper over $3 now, they should have a full quarter of selling at these levels causing earnings to benefit greatly. With the price of copper higher and some production problems behind them this upcoming quarter should be a blow out. The stock has a P/E ratio of 9 right now which does compare to some of the bigger copper producing companies but their future earnings growth I expect to be much larger then the other copper companies. As a smaller mining company it is understandable that they lack some attention but a company that has billions in mining deposits only has a $275 million market cap is just ridiculously undervalued.

In the near term they are expecting their feasibility study to be finished on their Prosperity mine which should be a positive catalyst for the stock. I am also expecting this upcoming quarter to blow the socks of the previous quarter. Mix that with the fact that they have huge mining deposits in a safe country and I think this is a good takeover target from one of these larger mining companies. The stock had just recently been as high as $4.25 and I think there are a lot of reasons for it to at least get back to that level if not much more.

Time to go bargain hunting with Relm Wireless (RWC - $7.18)

After a horrible past week in the market it is tempting to think that almost all stocks are good buys here because they have just gone down so much. But with so much uncertainty out there I am going to be very picky with what I would consider. First I want a stock that had already been down before this recent market plunge showing that it should hit its bottom first. I also want a company that has just reported a good quarterly earnings report giving good reason for investors to come back in. An added bonus for Relm Wireless is that they came out with news today about a new contract which should really jump start its trip back up.

Relm Wireless makes a lot of different two way radios that are used by everyone from coal miners to homeland security agencies. About 70% of their business come from these government entities which also includes the latest contract they just signed. After problems in communication during national tragedies such as the Oklahoma City bombing and 9/11 a new federal standard was enacted giving a large boast to Relm's business. They are able to meet all the needs of their customers at lower prices then their competitors and business is flowing in because of it. The potential market for their products are only getting bigger as drilling for oil expands around the world, mining all around the world is increasing and industry in general is looking for reliable two way communication that does not rely on flaky cell phone networks. The company is continually releasing new products and are supposedly releasing some new technologies later this year that should boost sales. Overall the long term growth prospects look great.

This is a pretty small stock with a market cap under $100 million. It has decent volume on average for the size of company it is but it is definitely an under the radar stock. Like I said earlier the stock has been on a slide for about a month now dropping from $10 to almost $6. I could not find a reason for this fall and I think this presents a great opportunity after it has fallen more the last week. The past two quarters earnings were up 30% and 60% over their respective quarters a year earlier and the one analyst that covers the stock is looking for 27% long term earnings growth. So a high growth machine like this should have a high P/E right? Well apparently not in this case. Right now it has a measely P/E of 9, if it traded anywhere close to its growth rate it would easily be in the double digits.

I think this stock is way undervalued and under loved. With the news out today on a new contract sending the stock up 6% should be the stake in the ground screaming that it should not go any lower then these levels. I expect more contracts like these in the future as well as new products utilizing new and excting technologies that should propel the stock higher as well. I really think it should get back close to $11 within the next few months and well beyond that with the release of new developments and contracts.

Incredible Growth Story with Sunopta (STKL - $11.30)

A word of warning, this stock has been up a lot since the beginning of the year and coule be due a sizable correction. I will give my reasons for why I feel cofident that its stock price should be much higher but there is always danger when a stock has moved this much. I first found out about this stock a couple months ago when I went looking for some companies that were involved in the ethanol business. What I found was a company with a little bit of exposure to ethanol but had huge growth in the natural and organic food business. I consider this a big secular growth trend, just check out one of Sunopta's customers Whole Foods (WFMI). Whole Foods is doing great and things are only getting better for them.

Sunopta has three business segments: food, minerals and bioprocessing. Their food group which consists of soy, corn, fruit, fibers, etc. makes up 90% of their revenue. So this is what is really driving the company right now and in the near future. As I mentioned earlier they sell their goods to people like Whole Foods and make private label products for other companies with products like Soy milk. I think this is a great business to be in because there is growing demand in the U.S. for healthy and organic foods. People are willing to pay more for these types of foods because they are looking for foods that contribute to a healthy lifestly.

Their bioprocessing group has a steam explosion technology that can prepare previously discarded items like corn stalks to be converted to ethanol. They are currently involved in a contract with an ethanol producing plant in Spain which should be completed this quarter. As stated in their conference call they have received a lot of interest in this technology and the equipment is ready to produced for new customers. It is only a matter of more companies buiding these types of ethanol producing plants. This part of their company has generated a lot of attention and has probably contributed a great deal to the recent run in the stock price (take a look at PEIX). The exciting thing is that no one really knows how big this can get and it should generate positive movements in the stock as more contracts are signed.

The current stock price is at $11.30 with a P/E of 65. Which looks expensive at first glance but with a high grower like STKL the forward P/E of 29 should be the main factor to look at because their earnings for 2005 (the "E" part of the P/E ratio) really don't paint the full picture for STKL. Analysts are expecting long term earnings growth at 30% which frankly, I find conservative. This past quarter revenue increased by 54% from the same period a year ago and no one knows how much their ethanol business will play in future revenue.

To figure out my price target take a look at Whole Foods (WFMI) one of their main customers. Analyst are expecting long term earnings growth of 20% and they have a forward P/E of 42. So Sunopta is involved in the same business and growing faster then Whole Foods but has a lower forward P/E. That makes me think STKL is still undervalued. If you applied that 42 forward P/E to STKL you get a share price of $16. If you factor in the higher earnings and ethanol contract news that I think are coming, a share price of over $20 is not out of the question by this fall.

Navteq has been a favorite of mine (NVT - $44.37)

This stock has been a favorite of mine since last summer and not because it has had incredible movement on its share price. It has actually traded in a bounded range of $40-$55. I think it will bust through the $55 sometime this year and never look back.

I first learned about this stock after I bought my car in July '05. It came with a navigation system, the map in this system is created by Navteq. These navigation systems are no longer tied exclusively to the luxury cars (mine is a Honda Accord). Almost all luxury cars come equiped with their maps so obviously there is no more growth available in that segment. As the hardware components for these systems become cheaper more will be utilized in cheaper cars. Thus fueling more growth for Navteq.

That is nowwhere near the whole story with this guy though. Perhaps you have been to Yahoo! or Google's maps page to get directions. Yes, that would also be a map from Navteq. These types of online maps are growing in popularity and frequency on the web and they all have to pay regular fees to Navteq to get updates and continously use their maps.

This is still not their whole story. The largest growth segment of their business is in the handheld GPS devices, such as the ones that Garmin produces (check out how their stock has been doing). This is a relatively new area for Navteq and its future growth as admitted by them in their most recent conference call, is completley unkown by them right now. These type of devices are becoming more affordable and wildly popular which is huge for this stock.

Lastly digital maps are just starting to be introduced into cell phones. This is just at the ground floor but this is potentially their largest market. They are expecting very big things from cell phone deals in the future and are in current talks with the cell phone companies. As more news about these deals come out in the future, expect the stock to react very well.

The stock is currently at $44 almost $10 less then it was a week ago. This is because they reported earnings last week that missed analyst's estimates by 1 cent. Revenue for this past quarter was up 17% from the same quarter a year ago but net income was about the same. After listening to their conference call they explained that more of the expenses associated with updating their mapping software fell in the first quarter this year then last year. I think this is good news and presents a great buying opportunity because those expenses should not be as great in this upcoming quarter and the company's earnings should reflect that. WIth a P/E of 25 the stock is undervalued considering it is expected to grow earnings at close to 30% a year in the future. Which I believe to be very conservative esitmates.

I am expecting a lot of positive news in the future as there are just too many applications for their digital maps. The lowest this stock should ever get again is $40 while it should be heading back to the $55 level and beyond if things move right. This is another stock with great long term growth potential and a good looking near term risk/reward ratio. Sign me up!