Raven Industries Starts Fiscal Year On the Right Foot

Raven Industries, Inc. (NASDAQ: RAVN) reported its first quarter financial results for the period ended on April 30, 2017. The company showed strong growth in its net sales, operating income and net income year over year, which may have been the key drivers of RAVN’s over 6% rise in the the pre-market today. Additionally, Raven Industries President and CEO made some comments regarding its fiscal 2018 outlook, but did not give any guidance figures to look out for. Let’s analyze Raven Industries, and take a look at why some traders may be bullish or bearish.

Raven Industries, Inc. 1Q 2018 Financial Results

Raven Industries reported net sales of $93.5M for the first quarter of the 2018 fiscal year, which was a 36.8% increase from 1Q 2017. In turn, its operating income came in at $18.2M for 1Q 2018, compared to $8.1M in the same period in the prior fiscal year, or over a 120% increase year over year. This was primarily attributed to the increase of 770 bps in its operating margin year over year, as well as the company’s strong operating leverage. Consequently, Raven Industries reported net income of $12.3M, or 34 cents per diluted share, for 1Q 2018, compared to net income of $5.5M, or 15 cents per diluted share, in the same period in the prior fiscal year.

Raven Industries, Inc. showed significant growth in its revenues, operating income and net income was primarily driven by the performance in Raven’s Applied Technology and Engineering Films, as well as Aerostar.

Raven CEO Said This…

When speaking on the company’s fiscal 2018 outlook, Raven Industries President and CEO Dan Rykhus stated“We are very pleased with our overall performance in the first quarter…Both Applied Technology and Engineered Films drove significantly higher sales volume, resulting in operating leverage which led to strong incremental margins. Aerostar also achieved an improved financial performance.”

Rykhus added, “We are off to a strong start to the year…While we expect year-over-year comparisons to get progressively more challenging through the end of the year, we believe we are on track to deliver meaningful growth in revenues and operating profit in fiscal year 2018. At the same time, we are continuing to invest for the intermediate and long term. We are increasing our investment in research and development activities to continue our new product momentum, and we continue to look for additional strategic acquisitions.”

What You Need to Know About RAVN

  • RAVN reported its 1Q 2018 financial results yesterday, and shares are up over 6% during the pre-market.
  • The stock has a 52-week low of $17.40 and a 52-week high of $32.65.
  • As of May 22, 2017, Raven Industries was up 30.99% year to date, and over 85% over the past year.
  • Raven Industries had a trailing 12-month price-to-earnings ratio of 58.5, while the diversified industrials industry average was 24.8.
  • RAVN had a price-to-book ratio of 4.6, which may be considered overvalued, when compared to the industry average of 3.9.
  • The company had a trailing 12-month price-to-sales ratio of 4.3, while the industry average was 2.2.

Take a look at RAVN on the daily chart below.

Raven Industries, Inc.

Bull Case

RAVN showed strong growth in its revenue, operating income and net income year over year, which could be one reason some traders may be bullish on the stock. Additionally, if you refer to the chart above, the stock has been trading in an uptrend, and some traders may see this as a momentum play.

Bear Case

Some traders may see RAVN as overvalued, when looking at its price-to-earnings, price-to-book and price-to-sales ratios, which are above the industry average. However, one should keep in mind that RAVN is a small-cap company, and small caps tend to trade at higher valuations than mid- and large-cap companies. Additionally, traders may be playing this for a mean reversion trade, as the stock has moved over 85% in one year, while the industry was only up 20.10% over the past year.

Last Word

Raven Industries shares are up over 6% during the pre-market, after the company reported its first quarter 2018 financial results. The company exhibited its growth potential, and grew its revenues by over 35%, and more than doubling its operating income year over year. Now, there are some reasons traders might be bullish or bearish on the stock. However, both RAVN bulls and bears should be focused on the company’s conference call at 10:00 AM ET today.

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