Thursday, November 21, 2013

IEHC Jumps on Q2 Earnings

IEHC stocked jumped two quarters in a row on positive earnings. I am not totally clear on the exact reason for the rise though. Revenue and income was flat quarter over quarter. However, last quarter was an exceptional quarter and maybe the stock jumped on confirmation that the current rate of income is sustainable. At the current pace, IEHC will have its best year ever. I did not find anything worthy of note in the report. The report wording was almost exactly the same as last quarter (other than the actual numbers). The company reiterated that they have new products in the pipeline. It isn't clear to me whether the company has generated revenue yet from the new products, but it appears that sales will ramp up in the coming quarters. I am eager to see how much of an impact this will have on the overall revenue, and the market is anxious too, I am sure. But right now, my margin of safety lies in the stock price which still trades at 7 times my projected earnings.

The following chart shows the revenue, earnings and the stock price. As you can see, the stock only moves four times a year, when he earnings reports come out. I find that is the case for all the small and microcaps that I follow. This is great for the small time investor, there is little room for manipulation and hype such as what happens with the more universally followed stocks (for an recent example, think Tesla!). The small cap stock price is more likely to follow fundamentals.

Revenue and Earnings (mil) and Share Price (dollar) over last 12 months

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