Gamble of the week: Lights maker can shine again

Before the middle of last year, this company had been something of a glamour stock for investors. The company specialises in light emitting diode (LED) technology used in applications such as traffic lights, mobile-phone masts and broadcast towers.

But it has been the company’s move into the hazardous and industrial lighting market that got people excited.

Lighting sales and profits have grown rapidly since the firm started selling them five years ago. The potential for high rates of growth to continue for a long time saw its share price soar. However, two profit warnings during the last six months have seen the shares tank.

Potential orders are taking longer to turn into sales and profits, and the stock market doesn’t like this. That’s the problem with having a lofty share price – there’s no room for disappointment.

A good deal of froth has been blown off now the shares are trading at almost half their 52-week peak. If trading can pick up, then the shares could be worth a look.

Dialight (LSE: DIA)

Dialight share price chart

It’s important to point out that Dialight is not in the business of selling LED

lights to households, where the market is commoditised. The hazardous and industrial area, on the other hand, is a potential $10bn market, selling to oil rigs, chemical plants, power stations and mines.

These businesses need constant light. Dialight’s LED lighting can offer them lots of improvements. The key benefits are better light, much lower energy costs and less maintenance, all backed by a ten year guarantee. There is a reasonable up-front cost to get the lighting installed