Topic: Growth Stocks

TENNANT CORP. $41 – New York symbol TNC

TENNANT CORP. $41 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 19.1 million; Market cap: $783.1 million; Price-to-sales ratio: 1.1; Dividend yield: 1.7%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also makes cleaning equipment for garages, stadiums, parking lots and city streets. Tennant’s clients are mainly businesses and municipal governments.

Tennant continues to see strong demand for its “ec-H2O” floor-scrubbing machine, which uses electricity to make tap water act like a detergent. That eliminates the need for soaps and cleaning agents, and lowers the machine’s operating costs.

Strong demand for the ec-H2O is the main reason why Tennant earned $5.9 million, or $0.30 a share, in the three months ended March 31, 2011. That’s up 43.4% from $4.1 million, or $0.21 a share, a year earlier. Sales rose 15.0%, to $172.6 million from $150.1 million.

The company aims to develop more environmentally friendly equipment like the ec-H2O. For example, it recently started selling the Orbio 5000-sc, which creates a cleaning liquid using tap water, salt and electricity. Users can pour this solution into spray bottles and floor scrubbers.

Tennant spent $6.3 million, or 3.6% of its sales, on research in the latest quarter. That’s up 13.4% from $5.5 million, or 3.7% of sales, a year earlier.

The shares have gained 20% in the past six months, and now trade at a high 22.9 times the $1.79 a share that Tennant will likely earn in 2011.

Tennant is a hold.

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