Pro-Dex (PDEX) appreciated 93% in 2016 and I think they’ll have another good year in 2017 (though not as good as 2016). In February 2016, Nate Tobik published a PDEX write-up of mine in his Oddball Stocks Newsletter. While the stock has advanced faster than expected, the thesis hasn’t really changed so I’ve copied the entire write-up below. There are a few notable updates from the past ten months:

1. Their new #1 customer (referred to as project #1 in my write-up) signed a $24 million purchase order to be split between 2017 and 2018. Quite significant for a company that did $13.4 million in sales in 2015. This will be the catalyst for quarterly sales to ramp from the current run-rate of ~$5.3M up to $7M+ in 3Q17 (which ends March 31, 2017).
2. Their acquisitions haven’t gone as smooth as they hoped so they stopped M&A for the time being. With that being said, each segment is trending in the right direction. In the most recent quarter, the three small segments (ESD, Fineline Molds, OMS) made money for the first time. These had previously been dragging company results down. Margins in the core Pro-Dex business have also been trending up as they continue to work through some manufacturing inefficiencies discussed below.
3. Their production facility is only at 40-50% capacity so there’s a long runway for growth before major capex expansion is needed.
4. There are a couple potential new projects in various stages. As you can see below in my write-up, management is pretty tight-lipped on how large the projects they’re working on could be. This means estimating future revenue requires a lot of educated guessing. Suffice to say, there should be one or two new product launches in 2017 and I expect them each to be worth a couple million per year in revenue.
5. They’ve continued to repurchase shares.

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