September 29, 2008 - Techne Corp. (TECH-NASDAQ) and its subsidiaries engage in the development and manufacture of biotechnology products, and hematology calibrators and controls primarily in the United States and Europe. The company's biotechnology product line includes Cytokines, extracted from natural sources or produced using recombinant DNA technology; Enzymes and related factors including enzyme substrates and inhibitors; antibodies, proteins produced by the immune system of an animal; assay kits, such as human and animal Quantikine kits, which allow research scientists to quantify the amount of a specific analyte; clinical diagnostic kits, including erythropoietin, transferrin receptor, and Beta2-microglobulin immuno assays; flow cytometry products consisting of fluorochrome labeled antibodies and Fluorokine kits, which measure the presence or absence of cell surface receptors for specific cytokines by flow cytometry; and intracellular cell signaling products, including antibodies, phospho-specific antibodies, antibody protein arrays, active caspases, kinases, phosphatases, and ELISA assays.

I'm no doctor so I don't understand all of the above. But I recognize earnings when I see them, and TECH has plenty of those. Investors see the same thing since the stock has been on an upward track since early 2003 when it hit a low of $18.70 and has never looked back. So can it keep going?

If the last fiscal year is any indication, it has a good chance. While revenues were up 15% for the fiscal year (ended June 30, 2008), earnings jumped by 23% to $2.64 (vs. $2.15 in 2007). Three elements created the improvements: strong demand for Techne's products, currency benefits from a weaker dollar and a lower tax rate. For 2009 analysts project $2.90 and for 2010, they see $3.27. The company reports first quarter earnings on October 22 and is expected to announce 67 cents a share, up from 58 cents last year. For the second quarter, earnings should also be 67 cents a share, up from 60 cents a share a year ago. Over the last 5 years, earnings grew by an average of 19% annually. For the next 5, analysts project 11% a year. There are 4 analysts covering the company.

Growth is coming from the Far East and international sales in general. Biotechnology revenues from China and the Pacific Rim were a little more than 64% of all sales in fiscal 2008. Analysts see this trend continuing. With its strong product line (over 11,000 biotech products) already selling well, the company is adding new ones in both of its divisions to fuel further growth.

More numbers: Market cap is $2.82 billion with 38.6 million shares outstanding. P/E is 27.6. Price to Book is 5.73. Here are 2 numbers that leap out: Operating Margin was 56% for the last 12 months while the Profit Margin was 40.23%. And Return on Equity at 22% isn't too shabby either. Revenues last year were $257 million. This year look for $282 million. Current ratio is 12.769 with $206.35 million in cash (most recent quarter). That's $5.33 a share in cash. There is no long term debt.

Techne Corp. is doing well with every expectation of doing better. Investors have been buying the stock for years, believing in what the company does and management's acumen. But there is a caveat: nothing goes up forever and when valuations get stretched too far, the upside potential diminishes. That seems to be where TECH is right now. While it's a good company and earnings should continue to grow, it just may be that all of that is already reflected in the price.

Company Web site: www.techne-corp.com

- Ted Allrich