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IPG Photonics: Fiber Optic Laser Juggernaut

source：seeking alpha

keywords： IPG

Time：2017-08-26

 Summary
 
IPG Photonics is the world's leader in fiber optic lasers with 70% market share.
 
The company has compounded revenue at a 26% CAGR for the past 12 years and been profitable each of those years.
 
Operating margins are consistently above 35%, making this a remarkably profitable business (more so than tech giants like Apple and Google).
 
IPG is a vertically integrated innovation powerhouse, with 240+ patents granted (and 380 more pending).
 
Despite a wide moat, long track record of execution and above-average growth, IPG trades at 16X 2017 EV/EBIT.
 
Intro - A Blowout 2017 Awakens A Sleeping Giant
 
IPG Photonics (NASDAQ:IPGP) reported its Q2 2017 financial results on August 1st, and it was a quarter to remember. Revenue climbed 46% to $369M, and operating income rose 49% to $141M. This impressive momentum across its core business caused management to raise its guidance from 10-14% revenue growth to 32-34% for the full year.

On the back of these results and impressive guidance, IPG's stock has soared to an all-time high of $166 per share.
 
Despite this incredible run, shares remain surprisingly cheap. IPG is a vertically integrated laser manufacturer, with a remarkable 12-year track record of profitability and industry leading growth.
 
At today's price of $166 per share, IPG's market cap is nearly $9B (assuming 54M shares outstanding), and the company is on track to post EBIT of nearly $500M this year. based on these projections, IPG trades at only ~16X 2017 EBIT (when backing out $1B in net cash).

IPG Photonics was founded in 1990 by scientist Valentin Gapontsev. Prior to launching IPG, he was the senior scientist in laser material physics and head of the laboratory at the Soviet Academy of Science's Institute of Radio Engineering and Electronics in Moscow.