November 24, 2016
Bullish on Martinrea International
Martinrea International caters to the automobile manufacturing segment and is involved in developing fluid systems and metal forming. During the past 52 weeks the stock has traded as low as $6.70 and as high as $11.19. The company currently trades at $7.50 and value investors may be looking at an opportunity to add to their position.
Looking at the financials for this company it is hard to understand why the company trades at a market cap of only $650 million. Annual revenues over the past 3 years have increased on average 10% per year. Fiscal 2015 earnings per share (EPS) came in at $1.38 which was nearly a 40% increase from fiscal 2014. The company is on track for another great year with EPS greater than $1.00 and revenues closing in on $4 billion.
There are some unknowns regarding the company specifically around president-elect Trump’s victory and BREXIT which appear to be clouding the stock. The biggest concern regarding trade deals and how manufacturing taxes on import will affect the company. In my opinion BREXIT is still another 2 years or more from being completed. As for Trumps victory it is a wait and see game until we get clarification on how trade deals will work.
Looking at the 4 year chart above Martinrea tends to perform well in the months of January to mid June/July. This was evident in 2012, 2013, 2014, and 2015. The beginning of this year was a an exception to the trend which could be setting itself up for a promising 2017 beginning.
Martinrea continues to payout a quarterly dividend of $0.03/share. The yield on this dividend has increased from 1.07% to 1.6%. The dividend payout although small may provide some comfort for value investors who want to get paid while waiting for a rebound.
At the stocks current price there is lots of equity protection for new investors as the stock trades below book value. Look forward to a fresh new start for Martinrea.
My 12 month price target for Martinrea is $14.
Disclosure: I am Long Martinrea.