Andre Kovensky
Value, growth at reasonable price, special situations, long/short equity

Caesarstone: Strong Growth In Any Housing Market And 60%+ Return On Invested Capital

By Andre Kovensky and Alyjan Daya

Investment Summary: Caesarstone Sdot-Yam Ltd. (NASDAQ:CSTE) is a high growth company trading at a market multiple. Based on a discounted cash flow (DCF) analysis, CSTE is worth $73.94 per share, which implies 58.0% upside from the price of $46.79 (as of 7/23/2014). The investment thesis is very simple: CSTE can sell all the product that it manufactures, so assuming this situation does not change, an investor just needs to forecast production capacity, pricing and margins in order to forecast cash flow. Also, the return on adding new production capacity is a cash-on-cash return of about 63%, meaning CSTE can generate cash flow from an incremental production line that will pay for the...

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