Crunching The Numbers For Profit

Portfolio manager Ken Johnson doesn't necessarily take the company line

decent 16% average annual rate over the next five years, doesn’t hurt either. “Capital goods companies like Chart are benefiting from a strong economy,” says Johnson, “and besides that, management has worked hard to get new products out and boost efficiency.” And despite Chart’s rocketing growth rate, it sells at a wee P/E of 13 times 1998 projected earnings.

Technitrol (NYSE: TNL), a maker of electronic components for telecommunications and computer networks, is another high flyer in Johnson’s eyes. According to his calculations, the company should raise earnings an average 20% annually over the next five years, yet its stock fetches a P/E multiple of just 17 times this year’s profits. To top it all off, says Johnson, management is putting its money where its stock is; currently 20% of Technitrol shares are in the hands of management, up 12% since February.

Think of Hughes Supply (NYSE: HUG) as the Home Depot of wholesale construction goods–plumbing, air conditioning and heating supplies–and it’s easy to see why Johnson has them pegged for a 15% growth rate. “This is a consumer cyclical that is getting a boost out of a strong economy and the money a lot of folks are putting into their homes as a result,” he notes.

Johnson’s also a fan of Symantec (Nasdaq: SYMC), maker of specialty anti-virus and database software. The reason: new products such as PC Anywhere, a software that enables traveling business folk to check into the computer network at headquarters, are off to a roaring start. Symantec is growing earnings at an 18% annual clip and sells at a P/E multiple of 14.

Finally, Johnson has a soft spot for a St. Louis local, Spartech (NYSE: SEH), which makes thermoplastics used for housewares and toys. The company is North America’s largest producer in several key industry segments, and Johnson applauds its strategic policy based on savvy acquisitions. He thinks Spartech should grow earnings 16% annually over the next five years. Meanwhile, the stock trades at a rather modest 18 times projected 1998 earnings.

SCRATCHING BELOW THE SURFACE

Company

Exchange: Symbol

Current
Price*

Est. 5-Yr.
Annual EPS
Growth

P/E

Chart Industries

NYSE: CTI

23.44

16%

13

Technical

NYSE: TNL

39.06

20

17

Hughes Supply

NYSE: HUG

33.63

15

12

Symantec

Nasdaw: SYMC

26.00

18

14

Spartech

NYSE: SEH

21.94

16

18

*As of 6/23/98
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