RE:RE:RE:market trend favours PHO
This article would be a good read for newbies.
It also explains why management is prudent in growing their customer base too quickly..
Photon Control on the mark with solid customer base
26th Nov 2013, 1:06 pm by Anwar Ali
Growth at the company appears to be unfolding as planned. At the end of the three-month period ending in June, Photon's backlog had more than doubled to $3.3 million compared to the same period last year. Revenue in the same quarter jumped approximately 32% to $3.7 million versus a year-ago. If there's a company with its finger on the pulse, it’s (CVE:PHO) (TSX-V:PHO).
Quite literally, actually: its sensors monitor everything from the temperature in an industrial microwave to the amount of waste gas that is flared in oil production, making its work highly specialized.
In a nutshell, , which recently made Business in Vancouver's prestigious list of B.C.'s 100 fastest growing companies, develops optical-sensing technology for the semiconductor, oil and gas, power and life-sciences industries. The Burnaby, B.C.-based company sells both custom-made and off-the-shelf products.
Even though the stock price has nearly tripled in a 52-week period, with a 5 to 21-cent range, president and chief executive officer Chris Weston isn't paying too much attention.
“For the last few years, I haven’t really been worried about the share price so much as getting the business on solid ground,” Weston told Proactive Investors. "It’s been more about making the company sound and successful on a very stable platform for growth."
And growth appears to be unfolding as planned. At the end of the three-month period ending in June, Photon's backlog had more than doubled to $3.3 million compared to the same period last year. Revenue in the same quarter jumped approximately 32% to $3.7 million versus a year-ago.
Even though Photon still caters to a wide array of industries, it sought to streamline its approach. The company was formed in 1988 to create safety controls for the oil and gas industry. It went public in 2000 and eventually expanded into optical flow metres for the energy sector. In 2006, it added optical temperature and position sensing to the mix.
However, when Weston came on board in late 2008, he said the company was in "bad shape." The board of directors made a determination for the company to focus on manufacturing and distribution of its products and to outsource its research and development division in order to improve its financial position. It's a tactic that's contributed to Photon's continuous profitability since 2009. "We've created a niche for ourselves," Weston says, a big change from the early days. “We were offering a number of different things to a number of different industries. And we were spreading ourselves too thin.”
Part of its niche is the ever-expanding semi-conductor space. The work that goes into making a microchip is long and delicate; the conditions needed to process the silicon wafer need to be stable. Photon sells sensors that go into large industrial tools, helping to regulate both the temperature and position of the wafers and, as a result, eliminate waste.
"The wafers are going through rapid heating and cooling during the many different etching processes, so they need extremely accurate and fast-responding temperature and position measurement and that's where we come into play," says Weston.
Some of Photon's clients are original equipment manufacturers, or OEMs, based in the United States, which then go on to sell their technology to major microchip manufacturing companies around the world. Sales lead times can vary from industry to industry, which may cause quarter-by-quarter income volatility. Weston says it can take several months to close a deal with companies that rely on heavy machinery and tooling equipment.
But he adds that "once you’re built into this equipment and these tools—let’s say in the semi-conductor industry, for example—they don’t change the design for several years.”
Photon's cutting-edge expertise creates a natural barrier to entry for potential competitors, which explains in part why there aren't many. “In each industry that we serve, or in each of our product categories, we have only a handful.”