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Alloy Steel International: Weak Hands Sell The Headline To Their Detriment
- AYSI Q3 earnings of 2.2 cents/share disappointed investors recently.
- The stock is currently down 27% from its pre-earnings price of $1.77.
- By normalizing the tax rate and excluding the effects of currency hedging, I show how the quarter was better than its headline.
- I believe that the 27% sell-off in the wake of these earnings has re-presented a very attractive entry point into a company with substantial upside.
Alloy Steel International: 200% - 300% Upside With Multiple Catalysts On The Horizon
- Despite its stable mining consumables business, favorable industry dynamics, fortress balance sheet, and strong historical performance, Alloy Steel International trades at <2.0x EBITDA and <4.0x EPS.
- Investors continue to ignore Alloy Steel International's stable, recurring revenue streams; long sales cycles; unique patented production process; and leading ARCOPLATE brand.
- Australian mining-focused manufacturers trade at multiples of 7.0x – 9.0x LTM EBITDA, indicating 250% - 350% upside given a re-rating in the stock.
- An acquisition would not be surprising over the next 6-12 months given Bradken's historical interest in Alloy Steel International and the recent death of Founder and CEO Gene Kostecki.
Alloy Steel International: Founder's Death Will Have Significant Implications
- Alloy Steel International was tremendously cheap at 0.7 times EV/EBITDA.
- Yet, it had a major problem: nepotism.
- That's what makes yesterday's death of its founder so relevant. The death of the founder increases the likelihood of the company being sold or being managed neutrally towards minority interests.
- Either way, it's likely that the death of the founder is going to make the share price trade several times higher in the next few months.
Alloy Steel International: 1X EV / Net Income, 62% Of Book Value For Growing Company
- Alloy Steel International, a manufacturer of patented wear plate for the mining industry, is selling for 1X earnings after backing its cash out.
- It is selling for 62% of book value.
- Yet, it has been growing earnings and book value.
- Investors have discounted the stock way too much over its uncommunicative (but results-producing) CEO and majority owner.
- Even if many things go wrong, this investment still has a high probability of working out.
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AYSI vs. ETF Alternatives
Manufacturer of Arcoplate ? a highly wear resistant fused super alloy & anti hang up solution for both fixed and mobile equipment. Our products are supplied worldwide across all industries, including mining, process, agriculture and earthmoving. AYSI's experienced team of design engineers can... More
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