Gentex produces products and systems that most of us rely on every day, products that most of us insist on owning, and products that everyone takes for granted. Gentex manufactures automatic-dimming rear-view mirrors and camera-based driver assistance systems to the global automotive industry. The company also provides commercial smoke alarms and signaling devices to the fire protection market, as well as dimmable aircraft windows for the commercial, business and general aviation markets.
Gentex Corporation (GNTX) is engaged in designing, developing, manufacturing, and marketing automatic-dimming rearview mirrors and electronics for the automotive industry; variable dimmable aircraft windows for the aviation industry; and commercial smoke alarms and signaling devices for the fire protection industry worldwide. The company offers automotive products, including interior and exterior electrochromic automatic-dimming rearview mirrors; automotive electronics; and interior and exterior non-automatic-dimming rearview mirrors with electronic features for automotive passenger cars, light trucks, pick-up trucks, sport utility vehicles, and vans for original equipment manufacturers, tier one automotive mirror manufacturers, and various aftermarket and accessory customers. It also provides photoelectric smoke detectors and alarms, photoelectric smoke detectors and visual signaling alarms, photoelectric smoke detectors and electrochemical carbon monoxide alarms, electrochemical carbon monoxide detectors and alarms, audible and visual signaling alarms, and bells and speakers for use in fire detection systems in office buildings, hotels, and other commercial establishments, as well as in residential applications. The company sells its fire protection products directly and through manufacturer representative organizations to fire protection and security product distributors, and electrical wholesale houses, as well as to the original equipment manufacturers of fire protection systems. Gentex Corporation was founded in 1974 and is headquartered in Zeeland, Michigan. (Daily Chart) ( Weekly Chart)
3 Aug 2014
1yr Target $34.43
1yr Cap Gain 18.43%
1yr Tot Return 20.63%
Market Cap $4.22 Bil
3yr EarnGR 16.33%
5yr EarnGR 28.63%
3yr DivGR 8.28%
5yr DivGR 5.43%
Payout Ratio 34.40%
EPS (ttm) $1.86
EPS next yr $2.00
Corporate History. Gentex opened its doors in 1974 as a manufacturer of high-quality fire protection products. Company founder Fred Bauer, who serves as Chairman of the Board and Chief Executive Officer, revolutionized the industry with the world's first dual-sensor photoelectric smoke detector - a device less prone to false alarms yet quick to detect slow, smoldering fires.
Gentex is best known, however, as the pioneer of the electrochromic, automatic-dimming mirror industry. Automakers had long been looking for a better way to eliminate dangerous rearview mirror glare. The Company believed that electronics and electro-optical sensing technologies held the key. In 1982, Gentex introduced the world's first electromechanical (motorized) auto-dimming mirror. It was quickly adopted by Ford and General Motors, who in just three short years were purchasing over 200,000 units annually.
The Company then engaged a talented group of research chemists and electrical engineers to achieve what many in the scientific community thought was impossible. In 1987, they brought a 50-year-old scientific phenomena out of the laboratory and into the automobile with the introduction of the world's first electrochromic auto-dimming mirror. An entire industry was born. Over the years, we've made nighttime driving safer for millions of drivers around the globe by providing the global automotive industry with mirrors that detect and eliminate dangerous rearview mirror glare. Gentex auto-dimming mirrors are offered as standard or optional equipment on over 300 vehicle models around the world. Our research has allowed us to now specialize in a broad spectrum of technologies and processes to deliver high quality products to the automotive, aerospace, and fire protection industries.
Core Competencies. Gentex develops and manufactures high-quality products for the automotive, aerospace, and commercial fire protection industries that primarily utilize the skills of electronics/microelectronics, software design /programming/engineering, chemistry, glass coating/fabricating, mechanical design, and electrical, industrial and mechanical engineering. The main product areas include auto-dimming rearview mirrors with advanced electronic features, including CMOS imagers/cameras for the automotive industry, commercial fire protection products for the U.S. market, and dimmable aircraft windows.
| || |
Revenues increased at a steady pace through 2007. In 2008 the company's sales suddenly, and unexpectedly, fell for 2 years in a row. Then in 2010 they once again started increasing. Today, analyst's estimates have the upward path continuing at the rate of 17.09% in 2014 and 8.75% in 2015.
Earnings followed a similar pattern with a decrease in earnings in 2008-2009. Then in 2010 earnings resumed their upward trajectory. Today, analyst's estimates for earnings are showing an increase of 25.26% in 2014 and a further increase of 4.63% in 2015.
Gentex's dividends have increased every year for the last ten years, except for 2010 when dividends were held steady. As the world economy went through a recession in 2008 and 2009, Gentex tried to maintain an increasing dividend by allowing the payout ratio to increase dramatically. It must have become obvious to management that this was no longer possible in 2008 as the dividend approached parity with earnings. As a result, the 2009 dividend, which was increased by only one cent from 2008, was maintained through 2010.
As the company increased sales and profits in the following years, management once again increased the dividend demonstrating management's concern for its shareholders. I expect going forward that the dividend growth rate, that had been restrained, will be allowed to grow and increase at a rate similar to the earnings growth rate.
That type of dividend policy would be great news for dividend growth investors.
Understanding Gentex Corporation's revenues, earnings and dividend growth rates can be a little daunting at first until you look at the fundamentals above. The 5 year growth rates for revenues and earnings are higher than the 3 and 10 year growth rates simply because of the decrease in revenues and earnings in the years 2008 and 2009. Subsequent to these decreases in revenues and earnings, there was a lag in the dividend increases. This resulted in a decrease in the 5 year dividend growth rate relative to the 3 and 10 year dividend growth rates. This is a little difficult to understand initially but with a little thought is begins to seem quite natural.
I believe that in the future this situation may occur again as the overall economy grows at various rates, but over a long period of time the dividend growth rate should approach the earnings growth rate. And that growth rate appears to be in the mid-teens.
Once again, that type of dividend policy would be great news for dividend growth investors.
Note: While not included on these two charts, the Stochastic Indicator can provide critical additional information on stocks moving sideways. The stochastic can often identity stocks that are over bought or over sold and allow swing traders to practice their tactics.
I'm looking at starting a position on this stock very soon. A company with revenues and earnings growing in the low to mid-teens, a 2.20% dividend with a very low payout ratio (34.40%), and an expected one year return on my investment of 20.63% is very appealing to an investor like me.
This company also has a moderate P/E (15.63), a moderate PEG (1.32) and very little debt. Finally the company is listed on the options exchange so I can sell puts to get into the stock and then sell covered calls once I'm a shareholder.
I think this company could easily become a substantial core holding in my portfolio.
The Live Interactive Chart