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My scope is to assist private companies both abroad and domestic wishing to go public in the U.S. We invest in the company in the earliest stages, and assist in coordinating their audit, legal RTO or IPO. We also offer M&A identification, execution and consulting, Investors relations... More
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  • A Look Into Two Compelling Industrial Plays 0 comments
    Jan 7, 2014 8:26 AM | about stocks: PATK, CFI

    Industrial stocks have long been out of favor given the state of economy, which is said to have been put on steroids by the Federal Reserve. While the recovery is nowhere near levels which can be called fantastic, the gradual process is having a positive impact on industrial plays. Buying specific industrial stocks such as Patrick Industries, Inc. (NASDAQ: PATK) and Culp Inc. (NYSE: CFI) make immense financial sense at current levels. Here is a closer look.

    Patrick Industries, Inc. makes and sells products and materials for the recreational vehicle and manufactured housing industries. The company also makes kitchen cabinet, household furniture, retail fixtures and commercial furnishings. A look at the company's latest quarterly report reveals its profits declined nearly 17 percent despite top-line registering a healthy growth of 30 percent. However, this was largely due to higher tax expenditure while operating margins remained constant. The company has fully utilized carried forward operating losses so there is no room for tax rates to go down in coming quarters but there is no reason to assume taxation expenditure will go up from current levels. The stock has remained range-bound over the last quarter but a forward price earnings ratio of 12.1 reveals it is attractively valued. As the impact of taxation is fully factored into stock's pricing, the company is likely to benefit from continued economic turnaround next year. Helping the matters is also an active share repurchase program under which Patrick Industries has bought back shares worth approximately $6.1 million so far this year.

    North Carolina based Culp Inc. makes mattress fabrics which are widely used in production of upholstered furniture. Continued recovery in the housing market is leading to a gradual uptick in associated products such as household furniture. It doesn't surprise as a result to see a 7.7 percent jump in Culp's top-line to $70.6 million in the latest quarter. Disappointing the market was the drop in profitability as bottom line tumbled 62 percent in the same period. Like Patrick Industries, Culp is also at a disadvantage of being compared with a high base which was artificially bolstered by tax credits. However, the saving grace was that gross and operating profits moved up, lending support to the stock which trades at a forward earnings multiple of 12. A debt equity ratio of just 0.07 and a price by sales ratio of 0.9 indicate the stock is undervalued and even though it may be only next year when the true value-unlocking takes place, the stock's consistent move in the North suggests the market has got confidence in it.

    Stocks: PATK, CFI
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