Evaluating GSIG: Investment Potential in the Reshaping Laser Industry
Dr. Rama Rao's analysis of Combined GSI and Excel reveals that GSIG stock is significantly undervalued, trading at approximately 0.1 times annual sales with a normalized annual revenue of $450M and net income of $30M. The report indicates a fair value assessment where the stock could potentially rise to $10 per share based on market comparisons with other profitable laser companies. This presents a unique investment opportunity, bolstered by internal growth plans and external expansion strategies.
Evaluating GSIG: Investment Potential in the Reshaping Laser Industry
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Combined GSI Group + ExcelReview Dr. Rama Rao RRCM.COM
Combined GSI + Excel • Reshaping Laser Industry • Solid Historical Performance • Market Valuation of Profitable Laser Companies • GSIG Stock – most undervalued • Assessment of Fair Value of GSIG • Great Opportunity • Internal Growth Opportunity • External Growth Opportunity Dr. Rama Rao RRCM.COM
Solid Historical Performance of GSI + ExcelNormalized Annual Sales of $450 M with Net Income of $30 M Dr. Rama Rao RRCM.COM
Annual Sales ComparisonNow Combined GSI + Excel Ranks # 3 Dr. Rama Rao RRCM.COM
Market Valuation ofProfitable Laser Companies • Most Profitable Laser Companies trade at Market Valuation ≈ One Time of Annual Sales (P/S =1). • The combined company of GSI + Excel is an exception! Trades at 1/10th of its annual sales. Dr. Rama Rao RRCM.COM
Market ValuationProfitable Laser Companies Dr. Rama Rao RRCM.COM
GSIG Stock PriceMost Undervalued • The combined company of GSI + Excel has outstanding shares of 41 M. • The stock trades at $1. • Market Valuation of $41 M. • The combined company has normalized annual sales of $450 M with net income of $30 M • GSIG trades at P/S ≈ 0.1 and P/E ≈ 1 • GSIG paid $350 M cash for Excel ($32/Share) • GSIG has $96 M in CASH ($2/Share) Dr. Rama Rao RRCM.COM
GSIG Stock Recent PerformanceLast Year & This Year Acquisition of Excel Year to date Dr. Rama Rao RRCM.COM
Fair Value Assessment ofGSIG Stock • Market Valuation should be one time of annual sales as other peer profitable laser companies. • The combined company should have a market valuation of ≈ $450 M (P/S =1). • GSIG should trade at ≈ $10/Share with 40 M shares outstanding. • This is the kind of stock – what Peter Lynch calls: “10 Bagger”! • Risk/Reward Ratio: 1/10 Dr. Rama Rao RRCM.COM
Great OpportunityGame Plan • Take advantage of undervaluation of the combined company (GSIG) for a possible future investment appreciation. • Interact with Mgmt/Board in order to enhance the share holders value. • The combined company can become a nucleus - $2B industry consolidation – Excel Dream! • Established a monopoly in the Laser Industry – control/enhanced gross margins – further appreciation of stock price. Dr. Rama Rao RRCM.COM
GSI Internal Growth Opportunity • New Products: • Fiber Laser/ Disc Laser/ Diode Laser (New Generation – Compact & Efficient) • New Emerging Asia Expansion: • Asia – China/India – Industrialization (Legacy Products) • North America & Europe Market Share Expansion • With New Compact /efficient Products • New Emerging Applications: • Solar Panel • Nano Structure/Semiconductor fabrication Dr. Rama Rao RRCM.COM
GSI External Growth Opportunity • Now GSI + Excel with normalized annual sales of $450 M ranks #3 behind Coherent ($600 M) and Rofin ($500 M) • Consolidate other small players (ESI : $280 M– semiconductor, II-VI: $280 M – optics, IPG: $180 M – industrial) • Strategically buy small niche players with new product & technology – Silicon Valley, China, India etc. • Use the Marketing & Sales distribution net work and efficient manufacturing capabilities of the combined company to promote the new products globally.
