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The recent slump in the market has made some great little companies look very attractive at current prices. Metalico (MEA) is one of those companies.

First some basics. Meatlico, Inc. is a small-cap metal recycling company based in New Jersey with a market capitalization of $263 million. The company operates 30 locations in 10 states. Its business recycles four different segment metal types: Scrap steel/iron, non-ferrous metals such as copper and aluminum, platinum group metals (PGMs) and specialty steels. Business strategy has relied on the company acquiring through acquisition, and recently through internal growth.

The stock is currently trading at approximately $5.50 per share with a 52-week high of $6.69 and a 52-week low of $3.07.

Let's take a look at Metalico's 2011 Q1 earnings report to see if it's a good buy.

Q1 2011:

  • P/E of 13.8.
  • Sales were $182 million, 32% higher than previous year's quarter.
  • Operating income was $17 million, %158 high than the previous year's quarter.
  • 46% increase in ferrous scrap unit volumes shipped.
  • 19% increase in non-ferrous scrap unit volumes shipped.
  • Metal margins improved due to higher metal selling prices.

Conclusion

The most recent earnings report has shown Metalico continues to grow at a strong pace during these tough times. Investing in recycling stocks may not be pretty, but Metalico has found a niche business where a demand for scrap metals will always exist. The CEO, Carlo Aguero, has publicly stated the company will continue to acquire small businesses to strengthen its business.

Earnings were much better than expected last quarter, and there has been no indication its business prospects have changed. This may be a real golden opportunity to take advantage of the slump in the market to pick up shares of this little company that turns scrap into profit.

Source: Metalico: Turning Scrap Into Profit