This week's superstock scan is different from the past. In this post, I will present with a new superstock candidate. As some old guards...

Weekly Superstock Scan 30 Oct - 3 Nov: LightPath Technologies, Inc. (LPTH)

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This week's superstock scan is different from the past. In this post, I will present with a new superstock candidate. As some old guards (stocks that I have highlighted earlier this year) re-appeared in my superstock scans, I will be highlighting them in a separate post. In that post, I will also be discussing some actions that I will be taking next week due to the high number of potential superstocks that appeared in the scan this week.


The new superstock of the week is LightPath Technologies, Inc (LPTH). LPTH manufactures optical components and higher level assemblies including precision molded glass aspheric optics, molded and diamond-turned infrared aspheric lenses, GRADIUM glass lenses and other optical materials used to produce products that manipulate light.





LPTH has a diverse clientele consisting of companies from industrial, laser, defense, medical, telecommunications, and instrumentation.


LPTH organized its business based on five product groups: low volume precision molded optics (LVPMO), high volume precision molded optics (HVPMO), infrared products, speciality products, and non-recurring engineering (NRE). In FY 2016, HVPMO and LVPMO contributed 36% of revenue while Infrared contributed about half of LPTH's revenue.


Technical



LPTH has been trading mainly in the range of $2.50 to $3.30 since April this year. Last week, price broke strongly above the range to close at $3.75. 8 millions shares were traded last week, which is 4 times its average trading volume.

There was no news on the company last week, so the reason for the strong surge in price is unknown.

Fundamental



Including the current quarter, LPTH reported 3 consecutive quarters of year on year EPS growth.

Acquisition of ISP Optics Corporation

In December 2016, LPTH acquired ISP Optics Corporation, a manufacturer of infrared products ranging from custom infrared optical elements to catalogue and high performance lens assemblies.

The acquisition allowed LPTH to gain additional capabilities and provide more products such as germanium, siliocon or zinc selenide aspheres and spherical lenses which are manufactured by diamond turning, hence meeting more demands required in an increasingly complex industry.

The acquisition also benefited LPTH in terms of larger scale and improved operating leverage.

Parts used for Self-Driving Vehicle

LPTH is working on the Light Distance and Ranging (LiDAR) line. LiDAR sensors are used in self-driving vehicles to allow the vehicles to see what is around them.

In April 2017, LPTH formed a partnership with OLE-Systems Laser Technology Co., a subsidiary of GreatStar Group, where LPTH is involved in design and manufacture of an optical system assembly based on its high power fiber delivery technology. The fiber delivery system will allow production-level position mapping for mission-critical applications, such as those for use with autonomous vehicle instrumentation

Increased Capacity

LPTH is in the process of adding additional equipment at their Orlando, Zhenjiang and Riga facilities. Additional space are also added at their Zhenjiang and Riga facilities.

These increases in capacity is to handle their short-term growth based on their expected demands.

Matrices
o Small float of  19.1 million shares. However, its average trading volume is even smaller at 300 thousand shares. Float approximately 64 times its average daily trading volume.
o LPTH is trading at 11.4 times its trailing twelve months EPS.

Risk Factors/ Things I do not like:

  • Multi-year resistance - The $3.70-$3.80 region is a multi-year resistance level. Since 2009, whenever, price hit that level, it will bounce off the resistance line. Even though this time round, the volume when it approaches the level is way higher, there may be many technical traders looking to sell/short the stock at that level.

  • Hurricane Irma - LPTH is affected by hurricane Irma though to a small extent. Their headquarters were left without power for days. As that is the period where the company ships heavily, their Q1 results may be adversely affected.





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All information in The Trader Diaries (TTD) does not constitute to investment advice or recommendation to buy, sell or hold. Readers are advised to consult their financial advisors prior to making any investment or pursuing any investment strategy. TTD will not be liable for any losses resulted from information published or shared from the blog.