Updates
10/25/2004 – Closing Price $23.07
On October 15th Raven Industries completed a two-for-one stock split. This results in adjustments to the target prices for the most recent Raven Industries Report from August 17, 2004. The new 24-month target price is $27.50, and the 12-month target price is $23.06. On October 18th Raven announced that they see a strong second half due to extremely strong demand for large plastic film in its Engineered Films Division. This demand was generated by recent hurricanes. After that announcement the stock hit its 12-month target price. If you own Raven continue to hold in anticipation of reaching the 24-month target price. If you do not own Raven, use any pullback in the share price below $20.50 as an opportunity to buy.

The Numbers

Raven Industries	NASDAQ:	RAVN
Electronic Instruments & Controls	PRICE:	$38.67
	TARGET:	$55.00

Stock Data			Sales & Earnin gs	2004A	2005E	2006E
Price (8/17/2004)	$38.67		Revenue (MM)	$143	$154	$167
52-Week Range	$40.22 - 23.22		EBITDA (MM)	$26	$29	$32
Dividend Yield	0.9%		EPS (diluted)	$1.50	$1.73	$1.94
Capitalization			Value Measures
Shares Outstanding (MM)	9.04		Price Earnings	25.27	21.92	19.68
Market Capitalization (MM)	$349.6		Price/Sales	2.45	2.26	2.09
Debt/Equity	0.00		Price/Book	4.08
Projections			Growth (5 Yr.)	Historical	Projected
12-Month Price Target	$46.12		Earnings	18.2%	13.0%
24-Month Price Target	$55.00		P/E/G	1.39	1.94
Annual Total Return	20.1%

The Logic
Raven Industries is an attractive buying opportunity for the following reasons:

• Stock is currently 30% undervalued
  
• Manufacturing company with four very different, high margin business activities
  
• Potential for growth above GDP levels in all business segments
  
• Effective change in management and strategy
  
• Recent history of accelerating earnings growth
  
• Approximate 2% dividend yield with history of increasing dividends
  

The factors that separate Raven Industries from other firms with similar profiles are:

• Low Price/Earnings, Price/Sales, and Price/Book ratios
  
• High ROE, ROA, and Gross Margin
• Low Payout Ratio of 27%

Areas for Shareholder Concern:

• Current success is closely tied to Roger Moquist becoming CEO
  
• New products in the Flow Controls Division may not be well received
  
• Electronic Systems Division may have difficulty generating revenue through new contracts
  

Expectations:
In August of 2000 a new CEO, Roger Moquist, took office and adopted a business strategy of “shrink, fix, grow”. So far he and his management team have shown an ability to deliver on that strategy. Non-producing assets were jettisoned, margins were improved, and now the business is growing. Diversification, high revenue growth, and strong margins in all business segments will drive earnings. As earnings continue to grow this company will become more widely held and the share price will rise.

Mike Shinn for www.fizone.com

August 17, 2004