Hurco Companies, Inc.
is a global industrial automation
company that designs and produces interactive computer controls, software and
computerized machine systems for the worldwide metal cutting and metal forming
industries. The Company
pioneered the use of interactive
graphical computer control systems that automate shop floor processes with the
introduction of the groundbreaking UltiMax® CNC control. The Company sells its products directly to customers in England, France,
Germany, Italy, Singapore, and China; and through independent agents and
distributors in North America, Europe, and Asia.
For the fiscal year ended
October 31, 2005, Hurco's revenues rose 26% to $125.5M; and net income totaled
$16.4M, up from $6.3M. Hurco had a 3-month price growth rate
of 87.3% (vs. the Industry's 13.1% rate), a 6-month rate of 79.1% (vs. the
Industry's 13.1% rate), and a 12-month rate of 130.0% (vs. the Industry's
23.5% rate). The Company was founded in 1968, and has its current
headquarters in Indianapolis, Indiana. Number of employees: 250.
Sector: Technology; Industry: Scientific & Technical
Instruments; Ticker:
HURC; Exch:
NASD;
01/03/06 Price: $31.35)
STOCK GRADE (ASG: 52.65)
BUSINESS & FINANCIAL SUMMARY
(Yahoo)
EXPANDED BUSINESS DESCRIPTION
(Reuters)
STOCK INFO/RESEARCH
(MSN)
OWNERSHIP
(MSN)
KEY DEVELOPMENTS &
RECENT NEWS
(MSN)
HISTORICAL PRICES (Yahoo)
COMPANY'S WEB SITE
STOCK'S CORE
STRENGTHS (SEE: Table Below)
| Management's Effectiveness (12 Mo.) |
. . . |
Return on Equity: |
34.03% |
| Profitability (12 Mo.) |
. . . |
Profit Margin: |
13.10% |
| Stock's Growth Record (12 Mo.) |
. . . |
Revenue: |
26.05% |
|
. . . |
EPS: |
149.46% |
|
. . . |
Price: |
125.94% |
|
. . . |
Dividend: |
NA |
| PE & EPS (12 Mo.) |
. . . |
Price/Earnings: |
12.57 |
|
. . . |
Earnings/Share: |
2.59 |
| Price
/ Share |
. . . |
As of 01/03/2006: |
$31.35 |
HURCO COMPANIES, INC. - EVALUATION
HURCO's
stock emerged as an ACE'S selection based on the evaluation results of the
criteria listed below. The evaluation results are encapsulated as one value in
ASG (short for ACE'S Stock Grade). ASG
is proprietary variable that was devised by ACE'S to measure the
quality of a stock for investment. HURCO's ASG value of 52.65 is
VERY GOOD.
A. MANAGEMENTS EFFECTIVENESS - EXCELLENT
B. PRODUCTS & SERVICES, SET OF - EXCELLENT
C. SALES -
EXCELLENT
D. CASH FLOW, FREE -
AVERAGE
E. PROFITABILITY - AVERAGE
F. PRICE-EARNINGS RATIO (P/E) - EXCELLENT (LOWER THAN
INDUSTRY'S AVERAGE)
G.
FINANCIAL HEALTH -
EXCELLENT.
H.
MARKET CAPITALIZATION -
EXCELLENT
I.
TRADED VOLUME -
AVERAGE
J.
PRICE GROWTH - EXCELLENT
A. MANAGEMENTS EFFECTIVENESS - EXCELLENT
How well a company performs
generally - in its
business operations, controlling costs, the success of its products and
services in the market place, profitability, and the like - depends on its
management's efficiency. Return on Equity ( ROE) is used as a general indication
of the company's efficiency.
HURCO's ROE (ttm) of 22.2% is higher (by about 161% and 39%
correspondingly) than the Industry's ROE of 8.5% and the S&P 500's ROE of 15.9%. (Ref.:
MSN Finance\Key Ratios).
ACE'S gives a preferential rating to a company that has a
comparable or relatively higher ROE than the Industry. ACE'S rating of
HURCO's Management's Effectiveness: EXCELLENT.
^ Back to Evaluation
B. PRODUCTS & SERVICES, SET OF - EXCELLENT
Products and services are the elements that enables a company to have a presence
in its target market and generate sales. The set of products and services that a company has and how successful those products and services performs in the
target market are very important factors in considering a company's stock for
investment.
HURCO's line-up of Products & Services.
Computer control systems, machining centers, turning centers (lathes) and parts
& service.
COMPUTER CONTROL
SYSTEMS & SOFTWARE
HURCO's proprietary computer control systems and software products
are sold primarily as integral components of its computerized machine tool
products. The control system allows a machine shop to select the programming
method that makes the most sense for that particular job.
Process automation is made possible with the Company's
UltiMax control which
could be programmed with
conversational (shop floor) or
NC programming with CAM compatibility.
The UltiMax control is ergonomically designed with easy-to-understand buttons,
slim, touch-screen, and color monitor. The control system comes in two basic
formats, with single or dual-screen display. With the interactive graphics, by
simply touching the portion of the part you want to edit, the program takes the
user right to the corresponding portion of code.
For metal fabrication, the Company's
Autobend computer
control systems are applied to metal bending press brake machines that form
parts from sheet metal and steel plate. The system consist of a computerized
control and an automated gauging system that determines where the bend should be
made. Two models of the system are marketed.
HURCO also offers software option products in
addition to its standard computer control features. These products are sold to
users of the Company's computerized machine tools. These optional products
enable a customer to increase machine throughput using higher cutting feed
rates; or facilitates optimized surface finishes on complex parts using faster
high-resolution part data transfers.
Other
HURCO software products; a Windows-based,
desktop programming system; a data file transfer software option, and a a
networking software option.
MACHINING CENTERS (TOOLS)
HURCO offers 12 machining center models. These
are computerized machine tools equipped with an interactive Ultimax
computer-control system. The machining tools consists of three product lines:
the VM Series, VMX Series and VTX-HTX Series. The
VM Series (with four models)
consists of vertical machining centers for the entry-level market. The
VMX
Series (with five models) consists of higher performing vertical machining. The
VTX-HTX Series (with 3 models) consists of the Company's highest performing
machining centers and is designed for machining complex, multi-sided parts.
TURNING CENTERS
(LATHES)
HURCO's new line of turning centers
(lathes) are designated as the
TM Series. The TM Series
(with three models: the
TM6,
TM8 and
TM10 models) is powered by Hurco's
proprietary computer-control system.. The
TM Series is designed for job shops and contract manufacturers seeking efficient
processing of small to medium lot sizes.
PARTS & SERVICE
HURCO's provides installation, warranty, operator
training and customer support for its products on a worldwide basis. In the
United States, its principal distributors have primary responsibility for
machine installation and warranty service and support for new product sales. The
Company also sells software options, computer control upgrades, accessories and
replacement parts for the users of its products. The Company has a substantial
installed base of existing customers.
(Ref.:
Reuters)
ACE'S
gives a preferential rating to a company who have
more than one product
and services that have present and continued utility in a broad and
dynamic market.
An estimation of the latter products' utility, distinctive qualities and competitiveness would be subjective assessments.
However, there is one objective data that indicates how well the subjective
elements of HURCO's products and services
are assessed and used by its target market - the company's
sales.
ACE'S rating of
HURCO's line-up of Products & Services: EXCELLENT
^ Back to Evaluation
C. SALES - EXCELLENT
Sales is an important indicator on how a company's products and services
performs in its target market. Generally, a high sales figure is preferred than a lower figure.
Also, a steady and appreciable growth in a company's total sales from one year to the next is a key indicator on how a
company is able (or unable) to sustain and improve the utility of its products and services in the marketplace.
HURCO's annual sales was $96.2M in 10/2000, $92.3M in 10/2001, $70.5M in 10/2002,
$75.5M in 10/2003 and $99.6M in 10/2004. (Ref.:
MSN Money\Financials).
HURCO's ttm annual sales of $119.6M was 66.33% less than the Industry's
sales of $355.3M.
HURCO's ttm Sales growth rate of 28.40% was 23.8% points higher than the
Industry's rate of 4.60%.
(Ref.:
MSN Money\Research).
ACE'S gives a preferential rating to a company that have demonstrated the ability to
sustain a high and progressively increasing level of sales from year-to-year. HURCO's
year-to-year annual sales - from 2000 to 2004 - declined to a low point in 2002;
recovered and surpassed the 2000 highest sales level in 2004. In terms of sales
volume, the Companies past 12 month sales is 66.33% less than the Industry.
However, in terms of growth rate,
HURCO's rate surpasses the Industry by 23.8% points. ACE'S rating of
HURCO's Sales Growth Rate: EXCELLENT.
^ Back to Evaluation
D. CASH FLOW, FREE -
AVERAGE
Cash flow is crucial to the operation and survival of companies. A company
having ample ready cash ensures that creditors, employees, and others can be
paid on time.
Cash flow could be considered as a better measure of a business's profitability
than earnings, because a company can show positive net earnings and have insufficient cash flow (that is, the company
is not able to pay its debts). Cash Flow
thus can be used as an indicator of a company's financial strength.
HURCO's cash flow during the past 5 years: $12.9M in 10/2000;
-$3.5M in 10/2001; $6.2M in 10/2002; $2.3M in 10/2003; and $6.8M in
10/2004.
(Ref.:
MSN Money\Financials).
ACE'S
gives a preferential rating to a company that have demonstrated the ability to
sustain a positive and appreciable cash flow from year-to-year. HURCO's
year-to-year cash flow - from 2000 to 2004 - declined to -$3.5M in 2001; and
rebounded from the latter low point to the $6.8M level in 2004. ACE'S rating of
HURCO's Cash Flow: AVERAGE.
^ Back to Evaluation
E. PROFITABILITY -
AVERAGE
Making a profit is the ultimate goal of every company. A useful gauge of a
company's profitability is its net income (also referred to as "earnings"). Related to a company's outstanding shares of common stocks, the company's total earnings is transformed
to "earnings per share" (or "EPS" for short). EPS is a very popular indicator of a company's profitability and a
powerful variable that influences the price of a company's stock.
HURCO's annual Net Income, for the past 12 months, of $1,913.4M is more
than 4 times the
Industry's Income of $463.9M). For the past 5 years, HURCO's annual Net Income are: $5.0M
in 10/2000; -$1.6M in 10/2001; -$8.3M in 10/2002; $0.5M in 10/2003; and $6.3M in
10/2004. In terms of growth, HURCO's Net Income have grown 130.90%
during the past 12 months (vs. the Industry's 15.90% growth rate).
(Refs.
MSN Money\Financials\Statements;
MSN Money\Wizard)
ACE'S gives a preferential rating to a company that have demonstrated the ability to
sustain a positive, appreciable and increasing net income..HURCO's
year-to-year annual Net Income - from 2000 to 2004 - declined to -$8.3M in 2002; and
rebounded from the latter low point to the $6.3M level in 2004. In terms of
income growth rate,
HURCO's rate surpasses the Industry by 115.0% points. ACE'S rating of
Hurcos Profitability: AVERAGE.
^ Back to Evaluation
F. PRICE-EARNINGS RATIO (P/E) - EXCELLENT (LOWER THAN
INDUSTRY'S AVERAGE)
A stock's Price-Earnings ratio tells us roughly how much investors are willing
to pay per dollar of earnings. Price-Earnings
is a ratio of a company's current share price compared to its per-share
earnings. The P/E ratio is a much better indicator
of the value of a stock than the market price alone.
In general, a high P/E means high projected earnings in the future. As such, the
P/E ratio could be interpreted as the reflection of the market's optimism concerning a firm's growth prospects. To
determine whether a particular P/E is high
or low, take into account a company's growth rates; and the P/Es of other
companies in the same industry. Historically,
the average P/E ratio in the market has been around 15-25.
Hurco has a P/E ratio of 12.57 (ttm) which is 12.1%
points lower
than the
Industry's P/E of 24.67 (ttm)
(Ref.: Yahoo! Finance\Competitors)
ACE'S gives a preferential rating to a company that has a
comparable or relatively lower P/E than the Industry. ACE'S rating of
HURCO's P/E Ratio: EXCELLENT (LOWER THAN INDUSTRY'S AVERAGE)
^ Back to Evaluation
G. FINANCIAL HEALTH -
EXCELLENT
The assumption of debt, i.e., financial leverage, are used by companies to
finance its assets. The magnitude of the debt's expense component affects the company's net income.
A company with significantly more debt than equity is considered to be highly
leveraged. A popular measure of financial
leverage is the "debt/equity ratio". A higher debt/equity
ratio generally means that a company has been aggressive in financing its growth
with debt. This higher ratio can result
in volatile or negative earnings as a result of the additional interest expense.
Thus, the Debt/Equity Ratio is popularly used
as a measure of a company's financial health.
HURCO's has a 0.08 Debt/Equity Ratio (latest 12 months). Compared with the Industry's
0.22 and the S&P 500's 1.07, Hurco has an excellent debt ratio.
(Refs.:
MSN Money\Ratios)
ACE'S gives a preferential rating to a company that has a
comparable or relatively lower debt ratio than the Industry. ACE'S rating of
HURCO's
Debt Ratio: EXCELLENT.
^ Back to Evaluation
H. MARKET CAPITALIZATION - EXCELLENT
Market Capitalization (or market cap for short) is a measure of a company's
size. The market cap provides a broad gauge
of the growth-versus-risk potential of a company. Historically, large caps have
experienced slower growth with lower
risk; whereas small caps have experienced higher growth potential, but with
higher risk.
The market cap of a company is calculated by multiplying the number of its
outstanding shares by the shares' current market price. There are presently six classes of Market Cap: Mega Cap, Big/Large
Cap, Mid Cap, Small Cap, Micro Cap and Nano Cap.
Hurco is a small cap value company with a market
capitalization of $203.02M and with outstanding shares of
6.22M. (Ref.:
Reuters)
ACE'S gives a preferential rating to small and mid cap companies. ACE'S rating of
HURCO's
Market Cap: EXCELLENT.
^ Back to Evaluation
I. TRADED VOLUME -
AVERAGE
A stock's price goes up or down based on the laws of supply and demand. Simply
stated, when a stock's price goes up, there must be significant buying demand
for the stock. Volume is the actual number of shares traded daily. Traded volume
could be used as a gauge of the demand for a stock.
Hurco has an 3-month Average Daily Volume of 185,608 shares; and
a 10-day Average Daily Volume of 123,343 shares.
(Refs.:
Yahoo! Finance\Statistics)
ACE'S gives a preferential rating to a company that sustains a
lively trade volume from week-to-week and month-to-month. ACE'S rating of
HURCO's Traded
Volume: AVERAGE.
^ Back to Evaluation
J. PRICE GROWTH - EXCELLENT
Price growth is the 12-month increase in the price of a
stock (displayed as a percentage). As of 01/18/06, Hurco had a 3-month growth
rate of 87.3% (vs. the Industry's 13.1% rate), a 6-month rate of 79.1% (vs.
the Industry's 13.1% rate), and a 12-month rate of 130.0% (vs. the
Industry's 23.5% rate).
(Refs.:
MSN Money\Research).
ACE'S gives a preferential rating to a company that have
demonstrated a solid capacity for high price growth and outperforming other
stocks in the Industry. ACE'S rating of
HURCO's
Price Growth: EXCELLENT.
^ Back to Evaluation
DISCLAIMER: ACE'S assumes no responsibilities for actions taken
by the reader(s) of this site and/or buyer(s) of ACE'S stock picks. ACE'S is
not providing investment advice. ACE'S is providing equity research
information. ACE'S do not make any claims, promises or guarantees
that the information contained in this site will result in a profit, loss or any
other desired result for the subject reader and/or buyer. The reader and/or
buyer assumes all the risk, including but not limited to loss, of capital
consequential to their investment actions. (SEE: FULL
DISCLAIMER)