The Gorman-Rupp Company (GRC)

GRC has really been on a run as of late. 2007 was a great year for their company as they supplied a large amount of flood control pumps to the New Orleans area. Going into this earnings season it was thought the company would miss with respect to sales as the US economy slowed down. During this time, they have received a huge increase in orders internationally with respect to fire protection and flood control. The company now has 29% of its sales from this area and growing. This should not be surprising as emerging markets are trying to increase their farmland on worldwide need of more agricultural commodities. The increase in food supply has caused a large back order with respect to these items. They have also received a large increase in orders as their pumps are used with respect to the pumping of petroleum products as the premise of many small wells equals the loss of large reservoirs of oil over the past few years.

... More GRC has really been on a run as of late. 2007 was a great year for their company as they supplied a large amount of flood control pumps to the New Orleans area. Going into this earnings season it was thought the company would miss with respect to sales as the US economy slowed down. During this time, they have received a huge increase in orders internationally with respect to fire protection and flood control. The company now has 29% of its sales from this area and growing. This should not be surprising as emerging markets are trying to increase their farmland on worldwide need of more agricultural commodities. The increase in food supply has caused a large back order with respect to these items. They have also received a large increase in orders as their pumps are used with respect to the pumping of petroleum products as the premise of many small wells equals the loss of large reservoirs of oil over the past few years.

For the first quarter they beat estimates by more than 40% with earnings per share of $.43 as opposed to the Street's view of $.37. Net sales increased 7% on the strong showing of international sales. This could show amazing growth going forward as their international increases not covered their huge backlog of work from the Katrina disaster, but also beat it. If this type of growth continues to increase, we could see an excellent second quarter going forward. Net income increased 40%. This record earnings quarter beat the year prior by $.13. They also announced that they would be expanding their operations for the sole purpose of meeting demand, and increasing their margins on cost savings.

This stock is another that looks to have strong fundamentals with respect to its chart. The stock has placed a bottom in at $31.36, and looks to be headed way higher. On April 25th the stock experienced a triple top breakout which looks to be headed to $52. If I were to make a comparison to any company, I believe they are quite alike with FLS. This is important as November 2nd of last year there was a major divergence between Flowserve and this company, which I think GRC will catch up.

The major increases in Government money with respect to trade surpluses has allowed many to invest in their water infrastructure. China is a good example with tens of millions of people moving to the city every year. This is not going to slow as they will continue to provide cheap labor to countries all over the world keeping inflation down. If Chinese rivers are any indication, many people in both China and India will die as they run out of drinking water. Rivers in this area are filled with garbage and feces, creating hygiene issues. When people and athletes from all over the world go to Beijing an see the horrible conditions, there will be an outcry and an unbelievable amount of pressure by other governments for China to spend some of their $3 trillion plus dollars in this area. When that is the case, GRC will be one of the biggest beneficiaries, not to mention, water industries all over the world will increase as agricultural demand does the same.

I believe they are sandbagging like crazy, as they know the international demand and don't want to disappoint investors. Look for this stock to move to $41 in 3 months. After gaining 21% growth last year, analysts have growth next year at less than 10%. I believe this company's growth will continue around the 20% rate, this places next year's PEG at around 1, and in turn is almost half as cheap on a basis of growth than Flowserve.