Raven Stock Bounces Off Support With Higher Moves Potentially to Come

Raven Stock Bounces Off Support With Higher Moves Potentially to Come
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Raven Stock Holding Up, With a Potential Move Back to Higher Prices

Farmers around the world are always searching for methods to improve their crop yields and efficiency. A small-cap Midwest company, Raven Industries, Inc. (NASDAQ:RAVN), is a play on the agricultural technologies segment (and other tech segments).

Raven has been delivering revenue and earnings growth along with positive free cash flow (FCF).

The company’s main focus is the development of solutions for the precision agriculture, high-performance specialty film, and situational awareness markets.

Raven’s products include field computers, application controls, guidance and steering, wireless connectivity, and cloud-based data management.

On its chart, RAVN stock is down 3.8% over the past year, outperforming the 5.5% decline in the S&P 500. The stock recently bounced off support around $33.50.

Chart courtesy of StockCharts.com

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The Fundamentals Support a Higher Price for RAVN Stock 

Raven Industries has ramped up its revenue in two straight fiscal years. The  company’s growth rate of 36% in fiscal-year 2018 was its highest revenue growth rate in four years.

Fiscal Year Revenue (Millions) Growth
2014 $394.7
2015 $378.2 -4.2%
2016 $258.2 -31.7%
2017 $277.4 7.4%
2018 $377.3 36%

(Source: “Raven Industries Inc,” MarketWatch, last accessed January 11, 2019.)

But there is some concern because Raven is estimated to see its revenue growth rate moderate to 7.8% (to $406.7 million) in fiscal-year 2019, followed by a growth rate of 3.9% (to $422.7 million) in fiscal-year 2020. While the rate is set to decline, it’s still better than in three of the previous four years. (Source: “Raven Industries, Inc. (RAVN),” Yahoo! Finance, last accessed January 11, 2019.)

Raven is profitable, with triple-digit percentage growth in fiscal-years 2017 and 2018.

Fiscal Year GAAP Diluted EPS Growth
2014 $1.17
2015 $0.86 -26.5%
2016 $0.13 -84.9%
2017 $0.56 330.8%
2018 $1.13 101.8%

(Source: MarketWatch, op cit.)

On an adjusted basis, RAVN is predicted to rally its earnings from $1.14 per diluted share in fiscal-year 2018, $1.59 per diluted share in fiscal-year 2019, and $1.54 per diluted share in fiscal-year 2020. (Source: Yahoo! Finance, op cit.)

Raven’s balance sheet is void of debt, and the company has been generating positive FCF.

Fiscal Year Free Cash Flow (Millions) Growth
2014 $22.1
2015 $43.0 94.5%
2016 $31.0 -28.1%
2017 $43.8 41.6%
2018 $32.6 -25.6%

(Source: MarketWatch, op cit.)

Analyst Take

RAVN stock has attracted strong institutional support, with 256 institutions owning almost 78% of the outstanding shares. The stock is also being bought up by a lot of insiders—a bullish sign. Insiders bought 155,873 common shares over nine transactions over the past six months. (Source: Yahoo! Finance, op cit.)

Considering all the factors outlined above, this stock has good long-term prospects. If Raven stock can hold, and the broader market sentiment improves, it could take a shot at $40.00—followed by a move toward $50.00.