Bway Holding Co.: Nice Packaging for Your Portfolio?

Aug. 1.07 | About: BWAY Holding (BWY)

Plastic and metal containers may be about as humdrum as possible, but they're in constant demand and can produce excellent profits for a leading packaging company like Bway Holding Company (BWY).

This is a new stock that just went public in June, and last week Goldman Sachs Group Inc. (NYSE:GS) initiated analyst coverage of the company and issued a positive report on BWY, predicting that the stock will grow to $19 within the next 12 months. This would be a nice jump for a stock that's currently trading around $14 -- representing a 35% upside premium -- and if it's right, BWAY could make you some nice profit.

Goldman was most bullish on BWY's margins; they've been strong and have been improving, with net income up 20% in the second quarter of 2007 over the second quarter of 2006. Based on its excellent fundamentals, Goldman is expecting a strong third quarter and a strong 2008 and 2009. BWY's products are used for such a wide range of products, the company stands little chance of losing revenues, and it has been acquiring other companies to achieve its growth. As BWY merges these acquisitions into its systems, it should continue to drive up profits alongside its revenues, and this looks like a company with a good long-term outlook.

The IPO price of $15 was a bit lower than had been expected, and BWY issued fewer shares than expected as well (just over 10 million were issued, while nearly 12 million had been expected). Some analysts and investors seem to see this as a sign of the company's weakness, but I think it merely means you have a chance to grab the shares at a more reasonable price. The next earnings statement is on August 7. If you're going to buy this one, I'd do it before then.

Type of Stock: A large and successful packaging and container producer that has just gone public.

Price Target: I'd try to buy this one below $14 if possible, to maximize whatever upside we see over the coming months.

BWY 2-month chart:

BWY