Micro-cap ($55 million) steelmaker Friedman Industries (NYSEMKT:FRD) is struggling under the burden of weak end markets, falling prices, and import steel dumping. Nonetheless, the shares are remarkably cheap. After an engaging interview with management, I submit the current woes are a function of the cyclical nature of the business, not a problem with the underlying company structure or management effectiveness.
Let's break it down.
Fiscal Year 2013 Wasn't Pretty
Friedman ended its most recent fiscal year March 31, 2014. Several fundamentals deteriorated into the fourth quarter, placing an exclamation point on an overall dismal campaign. Unusually harsh mid-continent U.S. weather conditions for the January-to-March quarter certainly didn't help matters. Year-over-year revenues, earnings, operating cash flow, and margins fell....
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