LSI Industries Inc. (LYTS), a leader in non-residential lighting and retail display solutions, reported impressive fiscal 2024 first-quarter results. The company posted revenues of $108.19 million and adjusted operating income of $8.82 million.
Analysts expected the company’s revenue for the fourth quarter (ended June 2024) to increase 2.7% year-over-year to $126.99 million, and its EPS is expected to be $0.19 for the same period.
The company acquired the privately held EMI Industries through an all-cash purchase price of $50 million expanding its display solutions capabilities within grocery, convenience store and restaurant markets. The acquisition contributes to LYTS’ vision to build premier commercial lighting and retail display solutions business in North America.
Further, LYTS’ Board of Directors declared a regular quarterly cash dividend of $0.05 per share in connection with the third quarter of fiscal 2024, which was paid on May 14, 2024, to shareholders of record as of the close of business on May 6, 2024. The indicated annual cash dividend rate is $0.20 per share.
James A. Clark, President, and Chief Executive Officer of LSI commented, "Our unique value proposition continues to build momentum across our key vertical markets, positioning LSI as a partner of choice for a growing, diverse base of customers across North America. Our third quarter results demonstrate further execution on this strategic focus, a performance that culminated in year-over-year growth in margin realization and profitability."
Shares of LYTS have gained 14% over the past six months and 27.6% over the past year to close its last trading session at $15.78.
Let’s look at factors that could influence LYTS’ performance in the upcoming months.
Positive Recent Developments
On April 19, LYTS announced the acquisition of privately held EMI Industries through an all-cash purchase price of $50 million. The acquisition expanded LYTS’ display solutions capabilities within grocery, convenience store and restaurant markets. The acquisition contributes to the company’s vision to build premier commercial lighting and retail display solutions business in North America.
The addition of EMI will lead to broadening of its product and services capabilities and is consistent with its Fast Forward strategy, positioning it to further capitalize on the ongoing, multi-year investment cycle evident across the grocery, refueling/c-store, and restaurant markets.
On February 27, LYTS’ JSI Store Fixtures, shipped its first order of refrigerated retail displays featuring environmentally friendly R290 refrigerant. R290 is a propane-based system giving customers an alternative product which is non-toxic, zero ozone-depleting refrigerant with a Global Warming Potential of 3 compared to the others.
Stable Financials
For the third quarter that ended March 31, 2024, LYTS reported revenues of $108.19 million, and its adjusted operating income grew marginally from the year-ago value to $8.82 million. The company’s adjusted net income and adjusted EPS came in at $6.24 million and $0.21, reflecting increases of 13.6% and 10.5% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA for the quarter stood at $11.24 million. Its current assets and total assets came in at $143.48 million and $287.97 million as of March 31, 2024.
Impressive Historical Growth
LYTS’ revenue grew at a CAGR of 18.1% over the past three years, while its EBITDA improved at a CAGR of 39.3%. Its EBIT increased at a CAGR of 58.6% over the same period while the company’s net income and EPS grew at respective CAGRs of 56.9% and 52.1% over the same time frame.
Also, the company’s normalized net income and total assets have improved at CAGRs of 55.4% and 13.5% over the past three years.
Favorable Analyst Estimates
Analysts expect LYTS’ revenue for the second quarter (ending December 2024) to come in at $136.45 million, indicating an increase of 25.2% year-over-year and the company’s EPS is expected to grow 20% year-over-year to $0.24 for the same period. Moreover, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
For the fiscal year (ending June 2025), the company’s EPS is anticipated to grow 6.8% year-over-year to $0.89, while its revenue is expected to increase 19.1% year-over-year to $556.93 million.
High Profitability
LYTS’ trailing-12-month levered FCF margin of 8.26% is 29.2% higher than the 6.39% industry average. Its trailing-12-month ROCE of 15.14% is considerably higher than the industry average of 12.33%. Likewise, the stock’s trailing-12-month Asset Turnover Ratio of 1.60x is significantly higher than the industry average of 0.78x.
Furthermore, the stock’s trailing-12-month ROTC and ROTA of 10.33% and 9.63% are higher than the 7.19% and 4.90% industry average, respectively.
Lower Valuation
In terms of forward non-GAAP P/E, LYTS is currently trading at 16.88x, 13.1% lower than the industry average of 19.41x. Likewise, the stock’s forward EV/Sales and Price/Sales of 0.99x and 0.95x are considerably lower than the industry average of 1.84x and 1.52x, respectively.
Additionally, the stock’s forward EV/EBITDA of 9.68x is 17% lower than the industry average of 11.66x.
POWR Ratings Reflect Promise
LYTS’ robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. LYTS has an A grade for Value and Sentiment, consistent with its lower-than-industry valuation and robust financial performance.
The stock also has a B grade for Quality, in sync with its higher-than-industry profitability. LYTS has topped among the 86 stocks in the Industrial - Equipment industry.
Beyond what I have stated above, we have also given LYTS grades for Growth, Stability, and Momentum. Get access to all the LYTS ratings here.
Bottom Line
LYTS reported solid financial results in the last reported quarter. Further, the company’s long-term prospects appear promising, driven by leadership in non-residential lighting and display solutions, cutting-edge product offerings, strategic acquisition and investments, broadening portfolio, and technological innovations.
Also, commercial expansion, operational excellence initiatives, and expand capabilities and market reach contribute to the company’s ongoing growth in the competitive market. Given strong financials, accelerating profitability, and robust growth outlook, it could be wise to invest in this stock.
How Does LSI Industries Inc. (LYTS) Stack Up Against Its Peers?
While LYTS has an overall POWR Rating of A, investors could also check out these other stocks within the Industrial - Equipment industry with A (Strong Buy) or B (Buy) ratings: Konica Minolta, Inc. (KNCAY), Makita Corporation (MKTAY), and Sumitomo Electric Industries, Ltd. (SMTOY).
For exploring more A and B-rated industrial stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
LYTS shares were trading at $16.19 per share on Tuesday afternoon, up $0.41 (+2.60%). Year-to-date, LYTS has gained 15.79%, versus a 17.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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