NVE Corp (NVEC)

Negative Earnings Surprise

NVEC (NVE Corp)
NVE Corp develops and sells sensors that are used to acquire and transmit data in industrial, scientific and medical applications. The uniqueness of their products is that the devices us "spintronics" (a nanotechnology that relies on electron spin rather than electron charge to acquire, store, and transmit information. I've seen pictures of these products, and they are much smaller then a fly, and some apparently weigh less then a mosquito. They have 52 patents that provides them with a moat with this technology.

Usually I avoid recommending any company who's products I don't understand fully, and I really have no idea what the competitive landscape for this company may look like in a decade from now, but I'll give this one an exception based on their great financial. This company makes a whopping 42% profit margin! That is insane! I can't think of one other company that consistently can kick out that kind of margin. Then add in their growth over the past 5 year average of 16% on their top line and 44% on their bottom line, and compare that to their trailing earnings multiple of 17 and forward estimates of 14, and you have quite a deal, especially when you consider they have $4 million in cash and no debt.

So again, although I have no idea what this may mean (from their annual report) "A limited number of other companies claim to either make or have the capability to make GMR and TMR sensors. Also, several competitors make solid-state industrial magnetic sensors including silicon Hall-effect sensors and anisotropic magnetoresistive (AMR) sensors. We believe those types of sensors are not as sensitive as our GMR or TMR sensors." I'll still be placing a small bet on this company due to the great growth rates it is experiences combined with it's incredibly fat profit margin.

RK