Seidman Investment Portfolio Organization

 

Company: Gentex
 
Sector: Consumer Goods (NASDAQ:GNTX)

Gentex Corporation is a local company, based in Zeeland, MI and was founded in 1974.  Gentex manufactures automatic-dimming automotive rearview mirrors, which accounted for 96% of the company's 2008 sales, and fire protection products (4% of 2008 sales).  The company sells to most of the major automakers, with revenues from its top four customers representing 60% of 2008 revenue.

Gentex has experienced tremendous turmoil in the past year and has witnessed two of its biggest customers, General Motors and Chrysler, declare bankruptcy.  As a result, management has strove to control costs by cutting its workforce dramatically and reducing capital expenditures.  Despite these cuts, earnings are expected to drop to $0.15 per share in 2009 from $0.85 per share in 2007 (ValueLine).  Difficult economic conditions have caused consumers to save more and postpone large expenditures, such as new cars.  Furthermore, the recent trend among consumers, which has been intensified by the government's $3 billion Cash for Clunkers stimulus program, has been the movement to smaller, more fuel-efficient vehicles.  This development will continue to decrease profit margins at Gentex (from 23.2% in 2008 to an estimated 14.5% in 2009), as smaller vehicles use less Gentex content. 

The combination of recent customer bankruptcies, decreasing spending by indebted American consumers, and continuing movement away from full-size trucks and SUVs indicate that IPO will seriously consider selling GNTX this year.

 

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Page last modified March 11, 2012