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Libbey: A Company As Fragile As Its Products

Mar. 02, 2018 8:51 AM ETLibbey Inc. (LBY)4 Comments
Carlton Getz, CFA profile picture
Carlton Getz, CFA


  • Libbey's share price decline and generous dividend attract attention from value-oriented investors.
  • However, the company's business and financial condition has deteriorated significantly, placing the company in a poor position.
  • We find that the company's shares are not materially undervalued, and the company's dividend may be at risk in the foreseeable future.

Libbey (NYSEMKT:LBY) is a manufacturer of glassware and related products for the business and retail markets. The company’s shares have fallen considerably since peaking two years ago, returning to prices last experienced during the last recession. The sharp increase in share price earlier this week – despite the company badly missing earning expectations – has done little to offset the long-term decline. The depressed valuation is cause for taking a closer look at the company's fundamentals to evaluate whether the decline represents an opportunity or reasonably reflects the company's underlying issues.

We review the company’s markets, operating performance, and other factors to develop a perspective on whether the company warrants further research and, ultimately, should be considered for investment. However, despite the depressed nature of the shares, our conclusion is that Libbey’s current share price reflects the ongoing challenges and risks of the business, and we don’t consider the company a compelling investment opportunity at this point.


Libbey is a leading manufacturer in the glassware and tableware categories for both business and retail customers and maintains an international presence although the majority of revenues originate in North America. The market is mature and highly competitive thus limiting pricing power and the opportunities for significant organic growth.

The lack of growth opportunities and pricing power is reflected in the company's own commentary and results. Revenues and operating income have been essentially flat or declining for the last eight years - a period of consistent economic growth - as reflected in the following chart:

Source: Company Financial Data

Indeed, the company has shown little evidence of significant growth potential despite holding a leading market position in its product categories.

The company has acknowledged that the market is extremely competitive but at the same time has offered a variety of other explanations

This article was written by

Carlton Getz, CFA profile picture
The author writes on behalf of Winter Harbor Capital, a private fund, and oversees private portfolios for individual and institutional clients. The author founded an investment company in 1995 with the view that a value oriented investment philosophy focused on intrinsic value and long term opportunities could generate superior absolute returns over time, leading to portfolios with unusual investment tenure sometimes exceeding 10 years. In addition to stints in micro and small capitalization research at Wasatch Advisors in Salt Lake City and in private banking with J.P. Morgan Private Bank in New York City, the author is a registered investment advisor, licensed professional engineer, and graduate of the Darden School at the University of Virginia.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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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