Metalico: Small-cap Metals Company On a Roll

| About: Metalico, Inc (MEA)

Unlike many of the stocks I play, I plan to own Metalico (NYSEMKT:MEA) for a long time. Today, MEA announced record 2006 second quarter sales which were up 49%, net income was up 159%, and earnings per share were up 140%, as compared to the second quarter of 2005.

Specifically, MEA reported Q2 EPS of $0.12 vs $0.05 in 2Q05; revs rose 49% YoY to $57.3 mln. That puts MEA at 23 cents in EPS for the six months ended June 30, 2006. Also, the company had EBITDA of over $7.6 million for the quarter.

MEA is a scrap metal recycler and lead products fabricator and with higher commodity prices the business is booming. However, the company recently announced a nice acquisition (Niles Iron & Metal) that should send MEA to the next level in a few quarters (even if commodity prices come down). Furthermore, Niles Iron & Metal sold roughly 226,496 tons of scrap in 2005, producing revenues of $65.6 million. For the twelve months ended June 30, 2006, Metalico and Niles Iron &Metal generated combined revenues of approximately $256 million.

On the Company's conference call today it indicated that pricing was still strong across the metals business and that they would be closing another previously announced acquisition shortly.

The company is tightly held with insiders owning the majority of the 26 million fully diluted shares (however, traders might like the fact that the float is only about 4 million). Over the longer term I can see MEA trading north of the $10 mark once these acquisitions start impacting results and/or Wall Street starts paying attention.

Finally, from a valuation perspective if you just annualize the first half of the year from an EPS standpoint you get .46 cents which breaks down to a pe multiple of only 12.5 (based on a $5.74 closing price today). That seems cheap for a company growing earnings YoY at 150%. Also, I think the EPS denomintor in above valuation metric is very conservative as it incorporates no additional earnings from the acquisitions.

MEA 1-yr chart:

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