Raven Industries Should Fly Again

I recently added Raven Industries (RAVN) (41.29, $745mm market cap) to the Conservative Growth/Balanced Model Portfolio and then to a charitable foundation that I manage.  Most likely, you aren't at all familiar with this South Dakota-based company.  Neither was I until it came across a screen that I regularly run earlier this year, and then again several weeks ago.  I have written about this screen before - it's my favorite:  Undercovered small-caps with strong balance sheet, high return on capital, favorable earnings revisions and positive price momentum.

RAVN has three divisions and a subsidiary.  The Flow Controls division has enjoyed spectacular growth, which isn't surprising given their focus on GPS-enabled technology  for precision spraying that permits farmers to minimize the use of fertizlizer.  Their focus is on the low-end compared to Trimble (TRMB).  Engineered Films (how boring does that sound?) is a business with many applications, much of which can become commoditized.  The company uses its technology to provide a differentiated product.  An exciting application is in the Energy Industry (frac pits, reserve pits), but there are many others, including residential construction.  Last quarter, the company spoke to the potential use in water conservation as well.  Electronic Systems is a high-touch low volume outsourced manufacturer.  This business has been hurt by the loss of a key customer, NovAtel, which was acquired late last year.  Aerostar manufactures high-altitude balloons as well as parachutes for the military.