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StockEgg Featured Company: Ceradyne Inc. (CRDN) Begins $100 million Stock Buyback Program

The end-use, high technology manufacturing process has to start in a lab. ”High-tech” products that consumers and governments take for granted need to spring from advanced material discoveries, and the companies that start the whole process are the basic material suppliers that “dream up” and then develop the ceramic powders and chemical chains necessary to make the products. These developers and manufacturers offer materials to all levels along the manufacturing chain and, in doing so, become the most stable and dependable manufacturers in the manufacturing process. They are the companies that make the manufacturing system go, whether physically moving product or making it possible.

Ceradyne Inc., a developer/manufacturer/marketer of advanced ceramic materials, works to offer advanced ceramic powders and components for high strength/high heat applications. Among these products are: ballistic materials for military and commercial automotive armor; high-strength materials for Radom’s and friction-resistant products; and high-heat resistance products. Generally speaking, the company offers products where extreme conditions require material properties exceeding the parameters of more conventional materials.

As might be suspected, the company is fairly stable with its sales and income generation. As a typical basic-material supplier, there is consistent demand for its products, whether from government or the private sector. For the year ending 2007, the company saw a $5.20 increase in fully diluted per share value. It also reported reaching a record sales volume of $756.8 million, up from $662.9 million. Given the nature of the company’s product base, it is fairly unlikely that it will vary substantially from its basic sales and income levels, barring world-wide economic collapse. As an illustration, the company reports that its current backlog of projects is $238.9 million, with several probable contracts not included given the nature of the awarding processes.

It is this awarding process that makes the true potential of the company’s year-over-year revenues a bit more difficult to predict. Its guidance for the coming periods was unusually broad in nature this year due to uncertainty of several larger government contracts. The contracts themselves are fairly certain to be awarded to the company, although their timing is uncertain. The company’s BULL combat vehicle program is a good example of this government letting process. This program will likely proceed, but “when” is the question. Although these types of concerns are always present, the company operates at a level of the manufacturing cycle where consistency can be reasonably guaranteed. Ups or downs in the cycle will come and go, but Ceradyne Inc. will most likely always be around to capitalize.

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