IPG Keeps Rolling, But Analysts See Growth Slowing
It may be an understatement to say that Oxford-based fiber laser manufacturer IPG Photonics' decision to move production of its fiber lasers in house has paid off.
Since 2010, the company has seen tremendous revenue and profit growth. It's is the market leader in the fiber laser space, and analysts covering the public company, whose stock trades on the NASDAQ, say IPG has been able to surpass competitors like Coherent and Rofin-Sinar Technologies by making its own fiber-based lasers and amplifiers in production facilities based in Germany and Russia, as well as here, in Oxford.
Thomas Hayes, an analyst with Nashville-based Thompson Research, explained it like this: The fiber-laser technology that IPG offers is more efficient in terms of power and cost, making it preferable to the older carbon dioxide (CO2) lasers available on the market, but they're expensive to make. In deciding to produce about 70 percent of its products in house, IPG controls much of its production costs, allowing profit margins to grow to 54 percent.
“So they've been able to close that pricing gap ... and they're the only ones who have done that,” Hayes said.
In the fiber laser space, Hayes said IPG has achieved market share of around 80 percent and the company doesn't seem in any immediate danger of losing that dominance.
To its variety of customers, including those in the automotive, aerospace, consumer, semiconductor and electronics markets, IPG's fiber lasers represent cost and energy savings, which results in the ability to move more product more quickly, Hayes said.
To gauge how well IPG has done, even coming out of the Great Recession, Hayes noted that IPG generated $188 million in revenue in 2007. These days, the company is almost averaging that per quarter.
Year over year, the company's revenue stream has bounded upward from $299.3 million in 2010, to $474.5 million in 2011, to $562.5 million in 2012.
A slowing of revenue growth may not be obvious from year to year. But it's reflected in the stock holds issued by some analysts when the company reported its earnings for the second quarter of 2013. One such firm was Noble Financial Group Inc. Mark Miller, a California-based analyst for the firm, said the company's revenue growth rate is expected to fall from 15 or 16 percent in 2013 to about 13.5 percent in 2014.
“That's still good growth; don't get me wrong,” said Miller, noting that the slowdown is just a sign that IPG has maxed out its growth potential. “You get so big and it's hard to perpetuate high growth.”
Miller compared the fiber laser replacing the CO2 laser to the electric car replacing the gas-powered car. Growth potential is limited. He added that IPG margin growth has probably peaked.
One area in which IPG has been bested is in the ultraviolet laser space. Miller said IPG has been talking about unveiling an ultraviolet laser product for some time, but its competitor, Newport Corp., beat the company to the chase.
Miller said this is “not a huge thing, but it's significant because it's new technology and the fact that somebody else jumped ahead of them is interesting.”
IPG did acquire ultraviolet laser manufacturer Mobius Photonics in March. In a recent conference call with investors, founder and CEO Valentin Gapontsev said those sales, which have been minimal to date, should increase significantly in 2014.
An IPG spokesman did not return phone calls seeking comment.
A Point Of Pride
IPG's successes are being felt locally. Oxford recently issued an extension on the $431,000 tax increment financing (TIF) deal granted to IPG in the late 1990s. The TIF is expected to generate $6.3 million in added tax value for the town, and the company has pledged to add 175 new jobs after adding about 100,000 square feet to its facility.
According to the town's building department, the project is still underway, and IPG has yet to receive a full occupancy permit for the new space.
Town Manager Joseph Zeneski said IPG has hired a significant number of new employees already, and he believes there's a positive ripple effect on other businesses in town. Plus, being home to a global manufacturer and exporter of cutting-edge fiber lasers doesn't hurt.
“We're proud to be part of it and they are, from what I can see, happy being here,” Zeneski said.
Read more
IPG Grows UV Laser Development With Acquisition
IPG Photonics Revenue Grows 15%
IPG's Revenue Soars 22% For Q2
WBJ Web Partners
Most Recent
Most Recent
0 Comments