I first recommended CECE at $3.50. back in March 2010. The earnings this quarter appear to support continued financial improvements over the next year, and certain macro events, i.e. tougher government regulations with regards to air pollution, would seem to indicate that CECE, a leader in air pollution control products, has extraordinary growth opportunities over the next 5 years both in the US and internationally in emerging markets (i.e. China, India, and Brazil). Notably, according to The McIlvaine Company, a recognized independent market consulting firm with expertise in the air pollution control industry, the world market for air pollution control systems, products and services is forecast to grow from $65 billion in 2004 to $250 billion by 2015.

With regards to the coming year, the company, from I can recall, predicted near double digit increases in revenue and an near doubling of the operating margin to 7%. So in keeping with the Lynch motto – “If things at a company are getting better, you want to own its stock” – I’d say CECE remains an excellent investment at current prices ($5.20), especially considering the still very low enterprise valuation relative to sales and potential profits.

Finally, it is interesting to note that the Chairman of CECE and the company’s largest shareholder, continues to buy stock in CECE on the open market, providing further evidence that the future for the company is promising.

About the only negative for CECE, from my perspective is that the company has already turned the corner to profitability and I generally like to buy companies that are still losing money. However, the profit potential of CECE is still so far below what it could be considering what are still the lingering effects of the Great Recession, that the “money-losing” criteria can be relaxed at this juncture. The stock will become a sell when CECE sales recover to pre-recession highs and operating margins near 10%. Furthermore, the stock price still remains well beneath five year highs of $10+, indicating potential above average returns over the coming years.

Disclosure: Affiliates of Envoy Global Research, and its principals, own shares in CECE. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise