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Ron Sommer is chief financial officer at an institution of higher education in New York City. He has 35 years of financial management experience in the public, private and not-for-profit sectors. Sommer has also been a private investor for more than 30 years. He uses a "value" bent in... More
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  • Friedman Industries, Inc., Great Prospects 0 comments
    Oct 25, 2009 02:04 PM | about stocks: FRD

    HIGHLIGHTS

    For a detailed analysis, go to http://measuredapproach.wordpress.com
     
    • Friedman Industries is one of those rare occurrences a company that is selling at near net asset value. For the quarter ending 06/09, the company reported current assets of $43.9 million and total liabilities of $5.6 million.
    • Inventory to Sales was 9.29% at the end of FY09. For the trailing 12 months, the Inventory to Sales ratio increased to 10.41%
    • The EPS growth rate for the trailing 12 months is 38.2%. The three and five year growth rates are 30.2% and 43.5% respectively.
    • FRD has a current ratio of 9.5 and no long term debt. This indicates that the company is financially secure. It is also indicative of a company that may not be putting its assets to the best use. Certainly, the company has room to employ some debt.
    • The company has a Price/Sales ratio of 0.2 based on trailing 12 month sales. This is very favorable.

    VALUATION METRICS

     

    In determining the fair market value of Friedman Industries, I considered income statement, balance sheet and statement of cash flow data. I give more weight to the statement of cash flows and balance sheet than I do to the income statement and reported or estimated earnings. In my opinion, debt is the greatest determinant of risk and nothing substitutes for cash.

     

    I assign a fair market value of $9.79 to the shares of Friedman Industries, Inc.

     

    Valuation Ratios
           
     

    Current Company

    MA Value

    Industry Median

    Price Earnings

    4.20

    6.99

    14.30

    PE to Growth

    0.13

    0.16

    0.40

    Price to Book

    0.70

    1.20

    1.20

    Price to Sales

    0.20

    0.41

    0.50

    Price to Cash Flow

    4.10

    6.94

    12.70

    Price to Free Cash Flow

    4.00

    6.80

    9.70

     

     DISCLOSURE: The author has no financial interest in Friedman Industries, Inc. (FRD).


    Stocks: FRD
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