Woodward (WWD): Potential Undiscovered Gem

It must be the stock-junkie in me, but I get excited when I come across a new Company in my weekend scans that I have never heard of previously.

Such is the case with Woodward (WWD), an Industrial with a $2.34B market cap that trades nearly 300,000 shares a day, so it was surprising to me that I had never come across the Company before. Apparently I am not the only one, as the StockTwits Stream has zero posts on the Company in its history.

Woodward designs and manufactures energy control and optimization solutions for commercial and military aircraft, as well as for ground vehicles and electrical power equipment. Eaton (ETN), Rockwell Automation (ROK), and Parker Hannifin (PH) are considered competitors. Woodward's markets encompass Aerospace and Energy, with applications for alternative fuel vehicles, electrical power generation, engines, turbines, and wind power.

Woodward shares trade 15.8X earnings, 1.58X sales, 2.84X book and 27.8X free cash flow, also a 0.82% dividend yield. Sales grew 7.6% Q/Q and on valuation is most comparable to Parker Hannifin (PH), although with better margins and growth outlook.

Woodward will report earnings Monday April 25th after the close, and it actually does trade options, but very illiquid with wide bid-ask spreads. Analysts expect EPS of $0.41 and Revenues of $392.75M for the Quarter and $1.81 and $1.61B for FY11. The estimates are comprised of 5 Analysts, although I do not see any recent analyst coverage on the under the radar Company. RW Baird, CJS Securities, CL King, DA Davidson, Dougherty & Co, Maxim and Sidoti cover the Company.

Shares are 64.57% Institutionally owned, room for expansion, so new buyers could come into the name, especially with a strong report, and based off the industry for engines and power equipment, I expect a strong outlook. Royce & Associates are the largest owner with 6.83% of shares outstanding, while T. Rowe Price, Vanguard, Blackrock, and Alger Mgmt. are also top owners.

It is tough to find a lot of in depth research on the Co., but with a good valuation and a small enough market cap, I would say it could make for a nice acquisition for one of the larger players it competes against.

Last, we look at the chart, and Woodward is holding a nice uptrend since July of 2009, making a series of higher lows, and recently topping out at $39 resistance in late 2010 and early 2011, with 5 year highs up around $47, shares currently at $33.97. The daily chart shows shares making a bullish MACD and ADX crossover and RSI breaking back above 50, so momentum is picking up.