Stable Company or Heartache?

Received detailed information on a company that manufactures food processing equipment.  I can’t give away too much – re: NDA.  But for the last four years revenue has fluctuated between $4.6mm and $5.5MM but for 2009 ended at $4.9mm.  Operating earnings between $500,000 and $600,000.  The revenue are split 50% new machines and 50% parts.  The client base seems well diversified – apparently over 300 clients last year.  Its a long standing – well established business – founded in 1956.  So operating income is 10% or revenue – not bad.  The question that looms large in my mind is – how is it that revenue is only $5mm?  Is it management?  Is it the competitive landscape?  Or is it the size of the marketplace?  Guess we’ll have to try and figure this out.  I have learned that as much as I think I am smarter than the seller – guess what – probably not.  And so is this a 10  / 20 mm business?

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