Acquisition Expected to Send Fast-Growing Diceon Soaring

Continued strong earnings at Diceon Electronics pushed the Irvine manufacturer’s stock near its 52-week high last week, with analysts betting that a key acquisition will push both earnings and the stock price still higher.

Last week, the maker of printed circuit boards reported a 28% increase in earnings and a 36% jump in sales for its third fiscal quarter, which ended June 27. That boosted profits for the period to $2.6 million and revenue to $30.1 million.

The gains, though hefty, were not unexpected: Since 1981, Diceon revenues have grown at a compounded 50% annual rate, while earnings have soared at a compounded 60% annual clip.

Doubled in Past 10 Months

And with that level of growth, Diceon shares have doubled in price in the last 10 months to close at $38.50 in over-the-counter market trading Friday, from $19 in September.

At least one analyst said Diceon stock could hit the $50 level next winter as earnings--aided by the recent acquisition of Symtron Corp. of Mountain View, which makes another type of circuit board--continue to grow.

Edward B. Keaney, a securities analyst with the St. Louis-based investment firm of Burns, Pauli & Co., said: “Obviously, it’s not as good a relative value as it was 10 months ago . . . but the outlook is for more earnings increases.” He is recommending purchase of Diceon shares.

For the company’s fiscal year ending Sept. 27, Keaney forecast net income of $9.3 million, or $1.52 a share fully diluted. That’s a 33% increase over last year’s results. Revenues are expected to jump 67% to $107 million--a figure that matches the company’s own estimate.

$2.30-Per-Share Income

For fiscal 1988, Keaney is expecting net income of $14.7 million, or $2.30 a share, and revenues of $140 million.

If Diceon can produce those results, the company’s shares at their current price would be trading at just 16.3 times earnings per share--a multiple now awarded to stocks of much more modest growth.

Keaney said he believes that a fast-growing company like Diceon should earn a multiple, or price-earnings ratio, of closer to 22. And that, he said, could push the shares to the $50 mark.