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If you believe you have missed out on the cyclical stock rally, there are still worthy stocks that haven't left the station. Consider Freightcar America, Inc. (NASDAQ:RAIL). Freightcar is very cyclical, it manufactures railroad cars. Its revenues declined 90%, yes, 90%, from 2006 to 2010. Revenues declined to $143 million in 2010 from $1.445 billion in 2006. Amazingly, the company only suffered a small loss in only one year, 2010, due in part to its strong balance sheet. On December 31, 2011 it had no interest bearing debt and $102 million of cash.

What goes down in a recession and survives usually comes back up. Freightcar has enjoyed an extreme V shaped recovery starting in 2011. The company earned $0.71 in the fourth quarter of 2011, blowing away the analysts average estimate of $0.13 and last year's loss of $0.20. Earnings were $0.61 before a gain on the sale of railcars available for lease, arguably an operating income. Revenues in the fourth quarter of 2011 were estimated at $127 million. They came in at $187 million. Revenues have increased from $51 million in the fourth quarter of 2010 and $130 million in the third quarter of 2011. Railcar sales increased from 694 rail cars in the fourth quarter of 2010 to 1515 in the third quarter of 2011 to 2,489 in the fourth quarter of 2011.

The real stunner was the new orders. These increased to 4,481 in the fourth quarter of 2011, 80% higher than actual sales in the quarter. The average revenue per railcar sold was $75,171 in the fourth quarter of 2011. This indicates a revenue run rate of $337 million per quarter based on the number of orders. That level of sales, when annualized, is just below the company's best year in 2006. That was the year the company earned $10.07 per share.

What's more, the company is quite leveraged to improving earnings as revenues increase. Revenues in the fourth quarter of 2011 were up 267% from one year earlier. Yet SG&A expense was only up 29%. That's about a 9 to 1 increase for revenues over SG&A expense. Also the gross margin is rapidly improving. It went from 7.0% in the third quarter of 2011 to 8.9% in the fourth quarter. The gross margin was 16.1% in the peak year of 2006. Further the company appears to be gaining market share.

Competitor American Railcar's (NASDAQ:ARII) fourth quarter 2011 revenues were up 107% from the prior year quarter. This shows how strong the industry is. However, this was much less than Freightcar's 267% increase. Freightcar is a company that can reach its prior high of $10 per share, and do so quickly.

The question then is how to value it. A company this cyclical does not deserve a P/E of 10 on peak earnings. However, the current stock price of $28 is well short value. Revenues and earnings appear on their way to surpassing the prior peak. Shouldn't the stock price follow? RAIL was trading over $70 back in 2006.

Source: FreightCar America Leaving The Station