IPG Photonics Is Getting Ready to Run

The Street liked what it saw in IPG Photonics' (NAS: IPGP) latest earnings. Year-over-year numbers clocked in solidly higher, forward guidance seemed appealing, and CEO Valentin Gapontsev offered bulls some glowing commentary. The sum of all this positive news sent shares up nearly 20% during intraday trading yesterday. But we don't want to buy on yesterday's news. What does all of this mean for IPG's future prospects, and can the company's high-flying stock keep up its winning ways? Let's take a closer look.

Hard numbers and real results
IPG clocked in with 23% higher revenue and a more impressive 30% boost to the bottom line from the year-ago quarter. The company has seen quarterly revenue nearly triple and quarterly net income increase over tenfold since the second half of 2009:

Source: Morningstar and IPG Photonics quarterly filing.
Source: Morningstar and IPG Photonics quarterly filing.

Source: Morningstar and IPG Photonics quarterly filing.
Impressive growth to be sure, and it's helped boost IPG's stock nearly 300% since then -- not counting yesterday's surge. But revenue and profit have both been a little flat over the past few quarters, with upcoming high-end revenue guidance of $138 million representing the first real breakthrough to the upside since 2011's third quarter. A projected high-end EPS target of $0.70 would also be a solid upgrade over this quarter's $0.61 per share in net income. While earnings did beat analyst expectations on both top and bottom lines, I'd be more excited about this improved outlook for near-term growth.

The company's primary business segment, materials processing, was up 19% year-over-year. This segment markets lasers to companies that need to manipulate hard objects in complex ways, such as welding and cutting for heavy machinery industries, as well as shipbuilding and aircraft manufacturing. Telecom and medical lasers made up only 16% of IPG's business, but saw 48% year-over-year growth.

Where do we go from here?
Continued strength will depend in part on global macroeconomic tailwinds, as much of IPG's sales go to Asia (including the Middle East) and Europe. Fellow Fool Brian Stoffel noted a potential cyclical downturn earlier this year, but still thought highly enough of the stock to take the plunge, as he bought in with truly excellent timing a day before the earnings release. Our Foolish community is similarly bullish, awarding the company a coveted five-star rating in The Motley Fool's CAPS. With a P/E barely over 20, IPG is still reasonably priced for growth investors.

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At the time thisarticle was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of IPG Photonics. Motley Fool newsletter services have recommended buying shares of IPG Photonics. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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