March 20, 2012 PSW Staff |
ferrous scrap metal recycling, PGM and Minor Metals recycling, and fabrication of lead-based products. The Company operates twenty-one scrap recycling facilities in New York, Pennsylvania, Ohio, and West Virginia; six PGM and Minor Metals recycling facilities in New Jersey, Texas, and Mississippi; and four lead fabricating plants in Alabama, Illinois, and California. Metalico is coming off of a very weak quarter where revenues, earnings and most importantly, margins were way down. The first two quarters of 2011, however, were excellent, and it is important to note that historically, this company sees less volume in the later part of the year. Looking at the big picture, we see a stock on its way back up seeming to have already worked out this short-lived lackluster performance. The company is optimistic about the current and coming quarters, and three analysts are predicting strong performance for 2012 and 2013. What particularly bodes well for future earnings upside surprises is the company's strategy to get margins back on track. Management said that margins were down due to decreased volume, weaker metal prices and increased competition. Metalico is in the midst of a very substantial expansion, adding new strategic locations and picking up some auto salvage yards. It has already commenced shipment from the company's new $10.1 million 4000 horsepower shredder at its buffalo location. The company has also purchased close to 100 rail cars that are currently being readied to transport goods. All of these initiatives will go a long way toward improving margins by adding volume, reducing costs and leaving competition in the dust. Metal prices, on the other hand are completely out of the company's hands, but management may be in an excellent position to make an educated guess as to where they are going. Essentially, the company's position is fairly conservative, stating that metal prices should remain stable as long as the U.S. and Chinese economies do not see a significant slow down this year. Accelerating economies, however, something we have two to three months worth of evidence pointing to, have not been figured into the equation. The number of shares outstanding for this issue climbed dramatically from 6 million in 2002, to around 47 million by 2009. Since then, however, this number has remained very stable. The company has a history of dramatic growth, with sales climbing from $60 million in 2002 to a high of $818 million in 2008. 2008 was the first year the company lost money in this period, $1.21 per share compared to earning $0.53 per share during the previous year on only $334 in revenue. 2009, 2010 and 2012 have seen very steady, sustainable, non-dilutive, organic growth. Sales were $291 million in 2009, $553 million in 2010 and $660 million in 2011. Earnings per share were at -$0.09 in 2009, $0.29 in 2010 and $0.37 in 2011. The company currently has around $5 million in cash and with property and equipment, now has the largest amount of assets it has seen at $365 million. Long term debt has stabilized despite and end to dilutive financing in 2009. The debt was at $154 million in 2008, and now stands at $116 million. Analysts expect earnings to be at $0.08 this quarter, $0.15 next quarter and $0.46 for all of 2012 on $704 million in revenue. The trailing twelve month P/E is at 11.51 and the 2012 P/E is at 9.28. Over the past 5 years, the stock has had a high P/E of 20, and a low P/E of 9. Any number of catalysts that seem extremely plausible in the coming weeks and months could send this stock towards the upper end of that P/E range in very quick fashion. |
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