Analyst Steve DeLuca at the Cruttenden & Co. investment banking firm in Irvine said he still considers Eltron's stock "slightly undervalued"--even though its shares trade at a healthy 23 times its annual earnings per share--based on the company's continuing growth prospects. He predicts Eltron's profit will jump to $4.1 million this year, up 46% from the $2.8 million in net income he expects the company to show when it reports its final 1994 results. He also projects sales growth of 57%, to $27.4 million in 1995 from $17.4 million in 1994.
The biggest risk DeLuca sees is Eltron's reliance on one customer, United Parcel Service, which now accounts for nearly 30% of Eltron's sales. The delivery company supplies Eltron's desktop printers to its large-volume customers. The printers are tied into UPS' computers so UPS knows what is being shipped, and can input data on the labels.
If UPS cuts back on that program, or switches to another printer supplier, Eltron's growth could quickly derail. Skinner said his goal is "not to have dependence on one large customer," but he doesn't appear overly concerned about losing UPS. In fact, he said, "They need to buy more."