Core Molding Technologies: Rare Undervalued Growth Play That Deserves To Double

Aug.30.11 | About: Core Molding (CMT)

It is rare these days to find a U.S based growth small cap growth story. Core Molding Technologies (NYSEMKT:CMT) is just that. CMT has approximately 7.1m shares outstanding and a public float of approximately 5.8m shares. The company has strong institutional and insider ownership, represtenting approximately 60% of shares.

The company's financial results and outlook for the future are impressive. CMT reported $0.39 EPS for the second quarter in 2011 v.s. $0.06 for the second quarter in 2010. For the first six months of this year, EPS was $0.70 v.s. $0.04 in the first six months of 2010. This is amazingly profitable growth. Product sales have increased 56% and 52% year over year for the second quarter and first six months of 2011, respectively.

Additionally, the future looks bright. Here are the comments from CMT's CEO in the last press release:

"We are very pleased with our results so far this year as we set another new quarterly earnings per share record for our Company," said Kevin L. Barnett, President and Chief Executive Officer. "Our markets continue to show strong growth and are forecasted for higher levels of demand in 2012 and 2013. We also continue to focus on new growth opportunities which have resulted in the award of several major new business programs that will start later in 2011 and into 2012," Barnett continued, "We began work on our previously disclosed $14 million Matamoros, Mexico plant expansion project to support capacity needs associated with new business and anticipated demand for existing products in 2012 and beyond. Additional molding capacity is scheduled to come on-line by the end of this year with the project slated for completion in the third quarter 2012," Barnett said.

The company is expanding for growth and also diversifying into other product lines. On August 22, CMT announced it had established a new operating subsidiary and manufacturing location to support a significant new business venture outiside its traditional heavy truck customer base.

Sometimes it takes time for a stock with growth like CMT to get noticed and appreciate to a proper growth multiple. CMT's up against easy year over year comparables the rest of the year. If it just repllicated the first six months of the year EPS over the remainder, it would have $1.40 EPS for the year, giving CMT a current P/E of 6. A P/E of 6 is extremely low for a company experiencing this type of profitable growth. I believe the same type of investors that found and ran up the stocks of Coffee Holding (NASDAQ:JVA), CVD (NASDAQ:CVV) and UFP Technologies (NASDAQ:UFPT) would love the growth story that CMT has.

I am long CMT at $8.60 and believe the stock deserves to double from this level based on its trajectory of growth and profitablility. A double would get it in line closer to an approximate 10 P/E, which many would still consider light for this type of growth.

Core Molding Technologies, Inc. is a compounder of sheet molding composites (SMC) and molder of fiberglass reinforced plastics. The company's processing capabilities include the compression molding of SMC, resin transfer molding, multiple insert tooling, spray up and hand lay-up processes. The company produces high quality fiberglass reinforced, molded products and SMC materials for varied markets, including light, medium and heavy-duty trucks, automobiles, automobile aftermarket, personal watercraft and other commercial products. Core Molding Technologies, with its headquarters in Columbus, Ohio, operates plants inColumbus and Batavia, Ohio, Gaffney, South Carolina, and Matamoros, Mexico. More information on Core Molding Technologies can be found at its website.

Disclosure: I am long CMT.