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ZENON's revenues have grown at a high rate, very consistently, for a long time. With the exceptions of 1999 and 2000, EPS growth has outputted revenues. There is always the risk of a sharp decline in: (1) the future P/E ratio - and share price - resulting from a surprising decline in a company's actual (or expected) EPS growth; or, (2) the general stock market.
To mitigate these risks, prudent investors would only consider purchasing such stocks using a series of modest purchases spread out over several months, quarters, and even years - rather than a single large purchase.
Currently, some 6,000 subscribers use ShareOwner's co-operative trading service to make such risk-reducing purchases. Commissions start at under $2 per trade. Editor
High Growth and a Declining P/E
ZENON is a leader in the manufacturing and use of a proprietary 'membrane technology' for water improvement and purification. The technology is used principally for: (1) purifying drinking water; and, (2) improving the quality of wastewater. ZENON produces both standard and custom-made, water and wastewater treatment systems for municipalities and a variety of industries that include: automotive, pulp and paper, power, and petrochemicals.
The company has research and development and production facilities in both Canada (Oakville) and Hungary. International sales and engineering offices are located in the U.S., Europe, Brazil, Singapore, China and the United Arab Emirates.
Historical and Future Growth Prospects
Patient, long-term investors typically want to purchase stocks that have strong prospects for increasing their price over the next five years. Knowledgeable investors know that, over the longer term, a stock's share price can experience sustainable growth only if the company's earnings per share (EPS) do; and, EPS can only experience sustainable growth if the company's revenues do too.
Accordingly, the natural place to begin studying a stock's potential for price appreciation is with the company's potential to grow revenues.
Here, we begin by developing an understanding of the company's products and their potential for being sold in increasing quantity during the next five years.
Revenues
As indicated by ZENON's Revenue Profile (opposite page) growth has averaged about 20% annually since 1995. Since 2000, revenues have grown quite consistently at 27% to $234 million for the latest fiscal year ending in December 2004.
Important...