Stuart Schaeffer

General Cable: Poised for a Good Run

Another 5x5 Article Brought to You By Today’s Value Investor

General Cable – BGC
Pros
1. Net Profit Margins have been increasing nicely over last 7 years or so…more efficient?
2. Sales have more than tripled since 2002.
3. Very impressive ROE since 1998 – has averaged 23.9 over those 10 years!
4. Competitive industry but BGC has outlasted many competitors.
5. Good long-term management has led to several key acquisitions over the last few years.

Cons
1. Long-Term Debt has doubled since 2002.
2. Since 2003 shares have appreciated by more than 2000%
3. Shares outstanding has increased by more than 50% since 2000
4. No dividend since 2002.
5. Leader in optic wire and cable products for communications industry…how much do we need? And is this a commodity type business? You bet! Margins will eventually deteriorate.

According to our proprietary valuation method, BGC is roughly 18% overvalued by the market. We really don’t see much of an upside with BGC over the next year it is in a commodity type business and a glut of optic wire and cable products about to hit the market in the near future.

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