Tecnoglass: Updated Outlook Even Better Than Expected

| About: Tecnoglass Inc. (TGLS)


TGLS is a leading manufacturing company of architectural glass.

In a recent interview with Colombian newspaper El Tiempo, COO Christian Daes gave an even brighter outlook than previously expected.

Despite superior growth and margins, stock trades at a significant discount to competitors.

Stock has declined with the broader market recently, but thesis is as strong as ever.

Tecnoglass Inc. (NASDAQ:TGLS) is a leading manufacturer of tempered, laminated, insulated, silk screened and curved glass for use in large commercial and residential buildings. I've written previously about the fact that they trade at a much lower multiple than competitors, despite their superior margins and growth rate, upcoming dividend initiation, and rapidly growing backlog. While the stock has declined in recent weeks along with the broader market sell-off, a largely unnoticed article in a Colombian newspaper gives us more conviction than we have ever had in TGLS.

A large portion of TGLS' business comes from very large commercial and residential construction projects. These projects are often scheduled years in advance, which gives TGLS a large backlog, with steady and predictable revenue. Their revenues are so predictable that the company issued full year 2016 revenue guidance at the beginning of 2015. At the time, they expected 2016 revenue growth of 20%, implying guidance of $288 million. They have reiterated that number throughout the year, but increased their EBITDA guidance from a range of $80 to $85 million to a range of $85 to $90 million, a reflection of their increased margins.

On January 17, 2016, Colombian newspaper El Tiempo published an interview with TGLS COO Christian Daes that discussed several aspects of the company's performance, including their expectations for 2016. In that interview, Daes said that 2016 revenue will be more than 1,100,000 million Colombian Pesos, which converted at the current exchange rate, equates to $330 million dollars, 15% higher than the guidance, or a 33% growth rate year over year.

The current guidance of $87.5 million of EBITDA on $288 million of revenue implies an EBITDA margin of 30.4%. Based on the updated forecast from the Daes interview, EBITDA could exceed $100 million in 2016. The recent sell-off in the stock price has driven the enterprise value down to $400 million, meaning TGLS is trading at just 4x 2016 EBITDA.

During times of market volatility, investors are increasing interested in putting their money in safe assets. In TGLS, you get a company with better than 25% revenue growth, 30% EBITDA margins, a large and growing backlog, and an upcoming dividend that will yield close to 5%, and trades at just 4x this year's EBITDA, making this an excellent buying opportunity that is unlikely to last very long.

Disclosure: I am/we are long TGLS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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