Great Trade for Clean, Fresh Water and Lower Risk

Crista Huff
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Posted: Feb 11, 2012 12:01 AM

Pall Corp. (PLL, $62.96)  is a global supplier of filtration, separation and purification technologies for healthcare, aerospace and industrial markets.

"Analysts believe that a combination of Pall’s broad geographic diversification (including an increasing presence in the emerging markets),  its steady stream of sales from replacement filters (~75% of revenue), and margin expansion should drive strong double-digit EPS growth over the next several years," reports Pall, Omega and Three More Growth and Income BuysForbes.com, January 29, 2012.  Margins are expanding due to restructuring benefits, staff reductions and plant closures.  Revenue and earnings growth is also enhanced by acquisitions and a share buyback program.

On Feb. 4, 2012, Standard & Poor's Research reported, "we project mid-single digit growth in FY 12, driven by increased global demand for biopharmaceutical, energy and commercial aerospace products. We also see growth in some water markets, and food & beverage, while microelectronics sales remain weak. Although some markets remain challenging, we expect favorable trends in emerging regions, especially Asia."

The company is consistently profitable and on a multi-year uptrend with revenue and earnings (EPS) growth.  Pall had revenues of $2.7 billion in 2011.  Wall Street projects earnings per share (EPS) to grow 16%, 12% and 15% in fiscal years 2012 through 2014.

S&P's Qualitative Risk Assessment is Medium: "Our risk assessment reflects the historically cyclical semiconductor industry and PLL's exposure to foreign markets, while civil lawsuits and an SEC and U.S. Attorney inquiry related to understating tax payments are still pending since 2007. This is offset by our view of PLL's reduced debt levels and positive cash generation."

The 2012 PE is 19.6 and the ten-year PE range has been between 11 and 48.  The 2011 long-term debit to capitalization ratio was 24.8%, the lowest it's been in ten years.  Pall Corp. stock has a current yield of 1.33%.

The stock price recovered from the 2008 Financial Meltdown by March 2010, then continued climbing to a new high $59.50 by April 2011.  The stock then corrected again with the late summer 2011 stock market downturn, fully recovered by late October 2011, and is marching steadily upwards again.  While any long-term growth investor or growth & income investor should be pleased to own Pall Corp. stock at the current price, I would prefer to wait for a bounce down to $56 and a corresponding dividend yield of 1.50%.

See also:  20 Low Volatility Stocks with Above Average Profitability, SeekingAlpha.com, January 31, 2012.