| Shares
of LoJack (LOJN) Remain a Steal |
Published: November 16, 2005
Although shares of
stolen vehicle recovery system maker LoJack (LOJN) have soared
over +165.9% since I added the stock to my Aggressive Growth Portfolio a little over a year
ago
(this portfolio is available exclusively to paid subscribers to my Market
Advisor newsletter), I'd like to take
this opportunity to explain why I think the stock is still a solid
"Buy."
For starters, LOJN
continues to deliver outstanding financial results. Most recently, the
stock jumped +15% after the firm topped Wall Street estimates with its
third-quarter results, posting +37% and +74% increases in revenues and
earnings, respectively. Meanwhile, the firm also issued bullish
full-year earnings guidance, projecting that net income would increase
by roughly 50-60%.
The firm's recent financial
results have certainly been impressive. However, if you're a long-term
investor, then over the long haul, these types of quarterly earnings
fluctuations aren't really going to make or break your investment.
Instead, you need to dig deeper to get a better understanding for the
firm's business model. Will the company continue to be successful in the
future, and if so, why? Is the firm's business model highly profitable?
Also, does the company boast any sustainable advantages over the
competition? These are just a few of the many critical questions
long-term investors need to ask themselves about a company before they
invest their hard-earned dollars.
The good news for investors is
that when you start to answer each of these questions one-by-one, LoJack
still looks like a great investment opportunity. The firm has developed
a unique, highly profitable business model, and margins have been on the
rise as the firm has grown. Gross margins jumped from 53% to 55% in the
most recent quarter, and operating income as a percentage of revenue
increased from 12% to 17%. LOJN also boasts a key sustainable
competitive advantage over its peers -- it is the only system of its
kind that is integrated into law enforcement agencies.
Here's how it works. First,
LoJack customers purchase a small tracking device that can be hidden in
any one of several dozen different places inside their vehicle. When
they report the vehicle as stolen, the LoJack system triggers the
device, causing it to emit a radio signal. Police officers then use
special tracking equipment in their vehicles to detect the signal given
off by the LoJack device.
Does the system work? You'd
better believe it. LoJack's vehicle recovery system boasts a success
rate of better than 90%, and the system has already been used to help
recover more than $3 billion in stolen assets.
Thanks to the fact that its
system is actually used in police cruisers across 24 states and in 25
countries throughout Europe, LoJack enjoys a sustainable advantage over
the competition. (By comparison, most competing products merely call the
police when a vehicle is stolen.) Meanwhile, despite posting gains of
+100% already this year, the stock still trades at a very reasonable 20X next year's
projected EPS estimates.
Looking ahead, as the company
continues to roll out its vehicle recovery system to new states and
countries around the globe, LOJN should deliver stellar financial
results and continued gains for shareholders.
Good investing!
-- Paul Tracy
Editor
StreetAuthority
Market Advisor
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Paul Tracy
founded StreetAuthority and became Editor in Chief in 2001. Prior to
that he spent several years as Managing Editor at a multi-million dollar
financial publishing firm with over 150,000 subscribers. In addition to
his role as managing editor and lead financial writer, he was also
responsible for equity research and managing a team of seasoned
professional financial writers, researchers and market commentators.
Paul's previous experience
includes a position at Robert W. Baird & Co.'s full-service
brokerage operations as well as economic research work on a Money and
Banking project funded by the National Bureau of Economic Research. He
has also spent time doing outside consulting and research for the
University of Virginia, has appeared as a guest expert on several
prominent financial radio shows, and has been a featured speaker at
various investment conferences across the U.S.
Paul graduated with a B.S.
in Finance and Management from the McIntire School of Commerce at the
University of Virginia.
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